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Banking Laws Set 2 Case List THIRD DIVISION

G.R. No. 152720

February 17, 2005

SOLIDBANK CORPORATION, petitioner, vs. Spouses TEODULFO and CARMEN ARRIETA, respondents.

DECISION

PANGANIBAN, J.:

A banks gross negligence in dishonoring a well-funded check, aggravated by its unreasonable delay in repairing the error, calls for an award of moral and exemplary damages. The resulting injury to the check writers reputation and peace of mind needs to be recognized and compensated. The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to reverse and set aside the March 28, 2001 Decision2 and the February 5, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 55002. The assailed Decision disposed as follows: "WHEREFORE, the appeal is DISMISSED, with costs against defendant-appellant."4 The CA denied reconsideration in its February 5, 2002 Resolution. The Facts The facts are summarized by the CA as follows: "Carmen Arrieta is a bank depositor of Solidbank Corporation under Checking Account No. 123-1996. On March 1990, Carmen issued SBC Check No. 0293984 (Exh. A) in the amount of P330.00 in the name of Lopues Department Store in payment of her purchases from said store. When the check was deposited by the store to its account, the same was dishonored due to Account Closed (Exh. B) despite the fact that at the time the check was presented for payment, Carmens checking account was still active and backed up by a deposit of P1,275.20. "As a consequence of the checks dishonor, Lopues Department Store sent a demand letter to Carmen (Exh. C) threatening her with criminal prosecution unless she redeemed the check within five (5) days. To avoid criminal prosecution, Carmen paid P330.00 in cash to the store, plus a surcharge of P33.00 for the bouncing check, or a total of P363.00 (Exh. F). "Thereupon, Carmen filed a complaint against Solidbank Corporation for damages alleging that the bank, by its carelessness and recklessness in certifying that her account was closed despite the fact that it was still very much active and sufficiently funded, had destroyed her good name and reputation and prejudiced not only herself but also her family in the form of mental anguish, sleepless nights, wounded feelings and social humiliation. She prayed that she be awarded moral and exemplary damages as well as attorneys fees. "In its answer, the bank claimed that Carmen, contrary to her undertaking as a depositor, failed to maintain the required balance of at least P1,000.00 on any day of the month. Moreover, she did not handle her account in a manner satisfactory to the bank. In view of her violations of the general terms and conditions governing the establishment and operation of a current account, Carmens account was recommended for closure. In any event, the bank claimed good faith in declaring her account closed since one of the clerks, who substituted for the regular clerk, committed an honest mistake when he thought that the subject account was already closed when the ledger containing the said account could not be found.
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"After trial, the lower court rendered its decision holding that Solidbank Corporation was grossly negligent in failing to check whether or not Carmens account was still open and viable at the time the transaction in question was made. Hence, the bank was liable to Carmen for moral and exemplary damages, as well as attorneys fees. It held that the bank was remiss in its duty to treat Carmens account with the highest degree of care, considering the fiduciary nature of their relationship. The dispositive portion of the decision reads: "WHEREFORE, the Court hereby renders judgment in favor of the plaintiff as against the defendant-bank, and defendant-bank is ordered to pay moral damages of P150,000.00; exemplary damages of P50,000.00; and attorneys fees of P20,000.00, plus costs. SO ORDERED."5 Ruling of the Court of Appeals The CA debunked the contention of the bank that the latter was not liable. According to petitioner, the dishonor of the check by reason of "Account Closed" was an honest mistake of its employee. The appellate court held that the error committed by the bank employee was imputable to the bank. Banks are obliged to treat the accounts of their depositors with meticulous care, regardless of the amount of the deposit. Failing in this duty, petitioner was found grossly negligent. The failure of the bank to immediately notify Respondent Carmen Arrieta of its unilateral closure of her account manifested bad faith, added the CA.
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The appellate court likewise affirmed the award of moral damages. It held that the banks wrongful act was the proximate cause of Carmens moral suffering. The CA ruled that the lack of malice and bad faith on the part of petitioner did not suffice to exculpate the latter from liability; the banks gross negligence amounted to a wilful act. The trial courts award of exemplary damages and attorneys fees was sustained in view of respondents entitlement to moral damages. Hence, this Petition.6 Issues

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Petitioner raises the following issues for our consideration: "I. Whether or not x x x respondents are entitled to recovery of moral and exemplary damages and attorneys fees. "II. Whether or not the award of moral and exemplary damages and attorneys fees is excessive, arbitrary and contrary to prevailing jurisprudence."7 The Courts Ruling The Petition is partly meritorious. Main Issue: Petitioners Liability for Damages Petitioner contends that the award of moral damages was erroneous because of the failure of Respondent Carmen to establish that the dishonor of Check No. 0293984 on March 30, 1990 was the direct and only cause of the "social humiliation, extreme mental anguish, sleepless nights, and wounded feelings suffered by [her]." It referred to an occasion fifteen days before, on March 15, 1990, during which another check (Check No. 0293983) she had issued had likewise been dishonored. According to petitioner, highly illogical was her claim that extreme mental anguish and social humiliation resulted from the dishonor of Check No. 0293984, as she claimed none from that of her prior Check No. 0293983, which had allegedly been deposited by mistake by the payees wife. Given the circumstances, petitioner adds that the dishonor of the check -- subject of the present case -- did not really cause respondent mental anguish, sleepless nights and besmirched reputation; and that her institution of this case was clearly motivated by opportunism. We are not persuaded. The fact that another check Carmen had issued was previously dishonored does not necessarily imply that the dishonor of a succeeding check can no longer cause moral injury and personal hurt for which the aggrieved party may claim damages. Such prior occurrence does not prove that respondent does not have a good reputation that can be besmirched.8 The reasons for and the circumstances surrounding the previous issuance and eventual dishonor of Check No. 0293983 are totally separate -- the payee of the prior check was different -- from that of Check No. 0293984, subject of present case. Carmen had issued the earlier check to accommodate a relative, 9 and the succeeding one to pay for goods purchased from Lopues Department Store. That she might not have suffered damages as a result of the first dishonored check does not necessarily hold true for the second. In the light of sufficient evidence showing that she indeed suffered damages as a result of the dishonor of Check No. 0293984, petitioner may not be exonerated from liability. Case law10 lays out the following conditions for the award of moral damages: (1) there is an injury -- whether physical, mental or psychological -- clearly sustained by the claimant; (2) the culpable act or omission is factually established; (3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) the award of damages is predicated on any of the cases stated in Article 221911 of the Civil Code. In the instant case, all four requisites have been established. First, these were the findings of the appellate court: "Carmen Arrieta is a bank depositor of Solidbank Corporation of long standing. She works with the Central Negros Electric Cooperative, Inc. (CENECO), as an executive secretary and later as department secretary. She is a deaconess of the Christian Alliance Church in Bacolod City. These are positions which no doubt elevate her social standing in the community." Understandably -- and as sufficiently proven by her testimony -- she suffered mental anguish, serious anxiety, besmirched reputation, wounded feelings and social humiliation; and she suffered thus when the people she worked with -- her friends, her family and even her daughters classmates -- learned and talked about her bounced check.
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Second, it is undisputed that the subject check was adequately funded, but that petitioner wrongfully dishonored it. Third, Respondent Carmen was able to prove that petitioners wrongful dishonor of her check was the proximate cause of her embarrassment and humiliation in her workplace, in her own home, and in the church where she served as deaconess. Proximate cause has been defined as "any cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the result complained of and without which would not have occurred x x x." 12It is determined from the facts of each case upon combined considerations of logic, common sense, policy and precedent.13 Clearly, had the bank accepted and honored the check, Carmen would not have had to face the questions of -- and explain her predicament to -- her office mates, her daughters, and the leaders and members of her church. Furthermore, the CA was in agreement with the trial court in ruling that her injury arose from the gross negligence of petitioner in dishonoring her well-funded check. Unanimity of the CA and the trial court in their factual ascertainment of this point bars us from supplanting their finding and substituting it with our own. Settled is the doctrine that the factual determinations of the lower courts are conclusive and binding upon this Court. 14 Verily, the review of cases brought before the Supreme Court from the Court of Appeals is limited to errors of law.15 None of the recognized exceptions to this principle has been shown to exist. Fourth, treating Carmens account as closed, merely because the ledger could not be found was a reckless act that could not simply be brushed off as an honest mistake. We have repeatedly emphasized that the banking industry is impressed with public interest. Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are even required of it. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors with meticulous care and always to have in mind the fiduciary nature of its relationship with them. 16

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Petitioners negligence here was so gross as to amount to a wilful injury to Respondent Carmen. Article 21 of the Civil Code states that "any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage." Further, Article 2219 provides for the recovery of moral damages for acts referred to in the aforementioned Article 21. Hence, the bank is liable for moral damages to respondent.17 The foregoing notwithstanding, we find the sum of P150,000 awarded by the lower courts excessive. Moral damages are not intended to enrich the complainant at the expense of the defendant.18 Rather, these are awarded only to enable the injured party to obtain "means, diversions or amusements" that will serve to alleviate the moral suffering that resulted by reason of the defendants culpable action.19 The purpose of such damages is essentially indemnity or reparation, not punishment or correction. 20 In other words, the award thereof is aimed at a restoration within the limits of the possible, of the spiritual status quo ante;21 therefore, it must always reasonably approximate the extent of injury and be proportional to the wrong committed.22 Accordingly, the award of moral damages must be reduced to P20,000,23 an amount commensurate with the alleviation of the suffering caused by the dishonored check that was issued for the amount of P330. The law allows the grant of exemplary damages to set an example for the public good. 24 The business of a bank is affected with public interest; thus, it makes a sworn profession of diligence and meticulousness in giving irreproachable service.25 For this reason, the bank should guard against injury attributable to negligence or bad faith on its part.26 The banking sector must at all times maintain a high level of meticulousness. The grant of exemplary damages is justified27 by the initial carelessness of petitioner, aggravated by its lack of promptness in repairing its error. It was only on August 30, 1990, or a period of five months from the erroneous dishonor of the check, when it wrote Lopues Department Store a letter acknowledging the banks mistake. 28 In our view, however, the award of P50,000 is excessive and should accordingly be reduced to P20,000.29 The award of attorneys fees in the amount of P20,000 is proper, for respondents were compelled to litigate to protect their rights.30 WHEREFORE, the Petition is PARTLY GRANTED and the assailed Decision MODIFIED. Petitioners areORDERED to pay respondents P20,000 as moral damages, P20,000 as exemplary damages, and P20,000 as attorneys fees. SO ORDERED.
Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

Garcia, J., no part. Concurred in the assailed decision.

Banking Laws Set 2 Case List

FIRST DIVISION

G.R. No. 146918

May 2, 2006

CITIBANK, N.A., Petitioner, vs. SPS. LUIS and CARMELITA CABAMONGAN and their sons LUISCABAMONGAN, JR. and LITO CABAMONGAN, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a petition for review on certiorari of the Decision1 dated January 26, 2001 and the Resolution2 dated July 30, 2001 of the Court of Appeals (CA) in CA-G.R. CV No. 59033. The factual background of the case is as follows: On August 16, 1993, spouses Luis and Carmelita Cabamongan opened a joint "and/or" foreign currency time deposit in trust for their sons Luis, Jr. and Lito at the Citibank, N.A., Makati branch, with Reference No. 60-22214372, in the amount of $55,216.69 for a term of 182 days or until February 14, 1994, at 2.5625 per cent interest per annum.3 Prior to maturity, or on November 10, 1993, a person claiming to be Carmelita went to the Makati branch and pre-terminated the said foreign currency time deposit by presenting a passport, a Bank of America Versatele Card, an ATM card and a Mabuhay Credit Card.4 She filled up the necessary forms for pretermination of deposits with the assistance of Account Officer Yeye San Pedro. While the transaction was being processed, she was casually interviewed by San Pedro about her personal circumstances and investment plans.5 Since the said person failed to surrender the original Certificate of Deposit, she had to execute a notarized release and waiver document in favor of Citibank, pursuant to Citibank's internal procedure, before the money was released to her.6 The release and waiver document7 was not notarized on that same day but the money was nonetheless given to the person withdrawing.8 The transaction lasted for about 40 minutes.9 After said person left, San Pedro realized that she left behind an identification card.10 Thus, San Pedro called up Carmelita's listed address at No. 48 Ranger Street, Moonwalk Village, Las Pinas, Metro Manila on the same day to have the card picked up. 11 Marites, the wife of Lito, received San Pedro's call and was stunned by the news that Carmelita preterminated her foreign currency time deposit because Carmelita was in the United States at that time.12 The Cabamongan spouses work and reside in California. Marites made an overseas call to Carmelita to inform her about what happened.13 The Cabamongan spouses were shocked at the news. It seems that sometime between June 10 and 16, 1993, an unidentified person broke in at the couple's residence at No. 3268 Baldwin Park Boulevard, Baldwin Park, California. Initially, they reported that only Carmelita's jewelry box was missing, but later on, they discovered that other items, such as their passports, bank deposit certificates, including the subject foreign currency deposit, and identification cards were also missing.14 It was only then that the Cabamongan spouses realized that their passports and bank deposit certificates were lost.15 Through various overseas calls, the Cabamongan spouses informed Citibank, thru San Pedro, that Carmelita was in the United States and did not preterminate their deposit and that the person who did so was an impostor who could have also been involved in the break-in of their California residence. San Pedro told the spouses to submit the necessary documents to support their claim but Citibank concluded nonetheless that Carmelita indeed preterminated her deposit. In a letter dated September 16, 1994, the Cabamongan spouses, through counsel, made a formal demand upon Citibank for payment of their preterminated deposit in the amount of $55,216.69 with legal interests.16 In a letter dated November 28, 1994, Citibank, through counsel, refused the Cabamongan spouses' demand for payment, asserting that the subject deposit was released to Carmelita upon proper identification and verification.17 On January 27, 1995, the Cabamongan spouses filed a complaint against Citibank before the Regional Trial Court of Makati for Specific Performance with Damages, docketed as Civil Case No 95-163 and raffled to Branch 150 (RTC).18 In its Answer dated April 20, 1995, Citibank insists that it was not negligent of its duties since the subject deposit was released to Carmelita only upon proper identification and verification.19 At the pre-trial conference the parties failed to arrive at an amicable settlement.20 Thus, trial on the merits ensued. For the plaintiffs, the Cabamongan spouses themselves and Florenda G. Negre, Documents Examiner II of the Philippine National Police (PNP) Crime Laboratory in Camp Crame, Quezon City, testified. The Cabamongan spouses, in essence, testified that Carmelita could not have preterminated the deposit account since she was in California at the time of the incident.21 Negre testified that an examination of the questioned signature and the samples of the standard signatures of Carmelita submitted in the RTC showed a significant divergence. She concluded that they were not written by one and the same person.22 For the respondent, Citibank presented San Pedro and Cris Cabalatungan, Vice-President and In-Charge of Security and Management Division. Both San Pedro and Cabalatungan testified that proper bank procedure was followed and the deposit was released to Carmelita only upon proper identification and verification.23 On July 1, 1997, the RTC rendered a decision in favor of the Cabamongan spouses and against Citibank, the dispositive portion of which reads, thus:

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WHEREFORE, premises considered, defendant Citibank, N.A., is hereby ordered to pay the plaintiffs the following: 1) the principal amount of their Foreign Currency Deposit (Reference No. 6022214372) amounting to $55,216.69 or its Phil. Currency equivalent plus interests from August 16, 1993 until fully paid; 2) Moral damages of P50,000.00; 3) Attorney's fees of P50,000.00; and 4) Cost of suit. SO ORDERED.24 The RTC reasoned that: xxx Citibank, N.A., committed negligence resulting to the undue suffering of the plaintiffs. The forgery of the signatures of plaintiff Carmelita Cabamongan on the questioned documents has been categorically established by the handwriting expert. xxx Defendant bank was clearly remiss in its duty and obligations to treat plaintiff's account with the highest degree of care, considering the nature of their relationship. Banks are under the obligation to treat the accounts of their depositors with meticulous care. This is the reason for their established procedure of requiring several specimen signatures and recent picture from potential depositors. For every transaction, the depositor's signature is passed upon by personnel to check and countercheck possible irregularities and therefore must bear the blame when they fail to detect the forgery or discrepancy.25 Despite the favorable decision, the Cabamongan spouses filed on October 1, 1997 a motion to partially reconsider the decision by praying for an increase of the amount of the damages awarded.26 Citibank opposed the motion.27 On November 19, 1997, the RTC granted the motion for partial reconsideration and amended the dispositive portion of the decision as follows: From the foregoing, and considering all the evidence laid down by the parties, the dispositive portion of the court's decision dated July 1, 1997 is hereby amended and/or modified to read as follows: WHEREFORE, defendant Citibank, N.A., is hereby ordered to pay the plaintiffs the following: 1) the principal amount of their foreign currency deposit (Reference No. 6022214372) amounting to $55,216.69 or its Philippine currency equivalent (at the time of its actual payment or execution) plus legal interest from Aug. 16, 1993 until fully paid. 2) moral damages in the amount of P200,000.00; 3) exemplary damages in the amount of P100,000.00; 4) attorney's fees of P100,000.00; 5) litigation expenses of P200,000.00; 6) cost of suit. SO ORDERED.28 Dissatisfied, Citibank filed an appeal with the CA, docketed as CA-G.R. CV No. 59033.29 On January 26, 2001, the CA rendered a decision sustaining the finding of the RTC that Citibank was negligent, ratiocinating in this wise: In the instant case, it is beyond dispute that the subject foreign currency deposit was pre-terminated on 10 November 1993. But Carmelita Cabamongan, who works as a nursing aid (sic) at the Sierra View Care Center in Baldwin Park, California, had shown through her Certificate of Employment and her Daily Time Record from the [sic] January to December 1993 that she was in the United States at the time of the incident. Defendant Citibank, N.A., however, insists that Carmelita was the one who pre-terminated the deposit despite claims to the contrary. Its basis for saying so is the fact that the person who made the transaction on the incident mentioned presented a valid passport and three (3) other identification cards. The attending account officer examined these documents and even interviewed said person. She was satisfied that the person presenting the documents was indeed Carmelita Cabamongan. However, such conclusion is belied by these following circumstances. First, the said person did not present the certificate of deposit issued to Carmelita Cabamongan. This would not have been an insurmountable obstacle as the bank, in the absence of such certificate, allows the termination of the deposit for as long as the depositor executes a notarized release and waiver document in favor of the bank. However, this simple procedure was not followed by the bank, as it terminated the deposit and actually delivered the money to the impostor without having the said document

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notarized on the flimsy excuse that another department of the bank was in charge of notarization. The said procedure was obviously for the protection of the bank but it deliberately ignored such precaution. At the very least, the conduct of the bank amounts to negligence. Second, in the internal memorandum of Account Officer Yeye San Pedro regarding the incident, she reported that upon comparing the authentic signatures of Carmelita Cabamongan on file with the bank with the signatures made by the person claiming to be Cabamongan on the documents required for the termination of the deposit, she noticed that one letter in the latter [sic] signatures was different from that in the standard signatures. She requested said person to sign again and scrutinized the identification cards presented. Presumably, San Pedro was satisfied with the second set of signatures made as she eventually authorized the termination of the deposit. However, upon examination of the signatures made during the incident by the Philippine National Police (PNP) Crime Laboratory, the said signatures turned out to be forgeries. As the qualifications of Document Examiner Florenda Negre were established and she satisfactorily testified on her findings during the trial, we have no reason to doubt the validity of her findings. Again, the bank's negligence is patent. San Pedro was able to detect discrepancies in the signatures but she did not exercise additional precautions to ascertain the identity of the person she was dealing with. In fact, the entire transaction took only 40 minutes to complete despite the anomalous situation. Undoubtedly, the bank could have done a better job. Third, as the bank had on file pictures of its depositors, it is inconceivable how bank employees could have been duped by an impostor. San Pedro admitted in her testimony that the woman she dealt with did not resemble the pictures appearing on the identification cards presented but San Pedro still went on with the sensitive transaction. She did not mind such disturbing anomaly because she was convinced of the validity of the passport. She also considered as decisive the fact that the impostor had a mole on her face in the same way that the person in the pictures on the identification cards had a mole. These explanations do not account for the disparity between the pictures and the actual appearance of the impostor. That said person was allowed to withdraw the money anyway is beyond belief. The above circumstances point to the bank's clear negligence. Bank transactions pass through a successive [sic] of bank personnel, whose duty is to check and countercheck transactions for possible errors. While a bank is not expected to be infallible, it must bear the blame for failing to discover mistakes of its employees despite established bank procedure involving a battery of personnel designed to minimize if not eliminate errors. In the instant case, Yeye San Pedro, the employee who primarily dealt with the impostor, did not follow bank procedure when she did not have the waiver document notarized. She also openly courted disaster by ignoring discrepancies between the actual appearance of the impostor and the pictures she presented, as well as the disparities between the signatures made during the transaction and those on file with the bank. But even if San Pedro was negligent, why must the other employees in the hierarchy of the bank's work flow allow such thing to pass unnoticed and unrectified?30 The CA, however, disagreed with the damages awarded by the RTC. It held that, insofar as the date from which legal interest of 12% is to run, it should be counted from September 16, 1994 when extrajudicial demand was made. As to moral damages, the CA reduced it to P100,000.00 and deleted the awards of exemplary damages and litigation expenses. Thus, the dispositive portion of the CA decision reads: WHEREFORE, the decision of the trial court dated 01 July 1997, and its order dated 19 November 1997, are hereby AFFIRMED with the MODIFICATION that the legal interest for actual damages awarded in the amount of $55,216.69 shall run from 16 September 1994; exemplary damages amounting to P100,000.00 and litigation expenses amounting to P200,000.00 are deleted; and moral damages is reduced to P100,000.00. Costs against defendant. SO ORDERED.31 The Cabamongan spouses filed a motion for partial reconsideration on the matter of the award of damages in the decision.32 On July 30, 2001, the CA granted in part said motion and modified its decision as follows: 1. The actual damages in amount of $55,216.69, representing the amount of appellees' foreign currency time deposit shall earn an interest of 2.5625% for the period 16 August 1993 to 14 February 1994, as stipulated in the contract; 2. From 16 September 1994 until full payment, the amount of $55,216.69 shall earn interest at the legal rate of 12% per annum, and; 3. The award of moral damages is reduced to P50,000.00.33 Dissatisfied, both parties filed separate petitions for review on certiorari with this Court. The Cabamongan spouses' petition, docketed as G.R. No. 149234, was denied by the Court per its Resolution dated October 17, 2001.34 On the other hand, Citibank's petition was given due course by the Court per Resolution dated December 10, 2001 and the parties were required to submit their respective memoranda.35 Citibank poses the following errors for resolution: 1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED AND GRAVELY ABUSED ITS DISCRETION IN UPHOLDING THE LOWER COURT'S DECISION WHICH IS NOT BASED ON CLEAR EVIDENCE BUT ON GRAVE MISAPPREHENSION OF FACTS.

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2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE DECISION OF THE TRIAL COURT AWARDING MORAL DAMAGES WHEN IN FACT THERE IS NO BASIS IN LAW AND FACT FOR SAID AWARD. 3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE PRINCIPAL AMOUNT OF US$55,216.69 SHOULD EARN INTEREST AT THE RATE OF 12% PER ANNUM FROM 16 SEPTEMBER 1994 UNTIL FULL PAYMENT.36 Anent the first ground, Citibank contends that the CA erred in affirming the RTC's finding that it was negligent since the said courts failed to appreciate the extra diligence of a good father of a family exercised by Citibank thru San Pedro. As to the second ground, Citibank argues that the Cabamongan spouses are not entitled to moral damages since moral damages can be awarded only in cases of breach of contract where the bank has acted willfully, fraudulently or in bad faith. It submits that it has not been shown in this case that Citibank acted willfully, fraudulently or in bad faith and mere negligence, even if the Cabamongan spouses suffered mental anguish or serious anxiety on account thereof, is not a ground for awarding moral damages. On the third ground, Citibank avers that the interest rate should not be 12% but the stipulated rate of 2.5625% per annum. It adds that there is no basis to pay the interest rate of 12% per annum from September 16, 1994 until full payment because as of said date there was no legal ground yet for the Cabamongan spouses to demand payment of the principal and it is only after a final judgment is issued declaring that Citibank is obliged to return the principal amount of US$55,216.69 when the right to demand payment starts and legal interest starts to run. On the other hand, the Cabamongan spouses contend that Citibank's negligence has been established by evidence. As to the interest rate, they submit that the stipulated interest of 2.5635% should apply for the 182-day contract period from August 16, 1993 to February 14, 1993; thereafter, 12% should apply. They further contend that the RTC's award of exemplary damages of P100,000.00 should be maintained. They submit that the CA erred in treating the award of litigation expenses as lawyer's fees since they have shown that they incurred actual expenses in litigating their claim against Citibank. They also contend that the CA erred in reducing the award of moral damages in view of the degree of mental anguish and emotional fears, anxieties and nervousness suffered by them.37 Subsequently, Citibank, thru a new counsel, submitted a Supplemental Memorandum,38 wherein it posits that, assuming that it was negligent, the Cabamongan spouses were guilty of contributory negligence since they failed to notify Citibank that they had migrated to the United States and were residents thereat and after having been victims of a burglary, they should have immediately assessed their loss and informed Citibank of the disappearance of the bank certificate, their passports and other identification cards, then the fraud would not have been perpetuated and the losses avoided. It further argues that since the Cabamongan spouses are guilty of contributory negligence, the doctrine of last clear chance is inapplicable. Citibank's assertion that the Cabamongan spouses are guilty of contributory negligence and non-application of the doctrine of last clear chance cannot pass muster since these contentions were raised for the first time only in their Supplemental Memorandum. Indeed, the records show that said contention were neither pleaded in the petition for review and the memorandum nor in Citibank's Answer to the complaint or in its appellant's brief filed with the CA. To consider the alleged facts and arguments raised belatedly in a supplemental pleading to herein petition for review at this very late stage in the proceedings would amount to trampling on the basic principles of fair play, justice and due process.391avvphil.net The Court has repeatedly emphasized that, since the banking business is impressed with public interest, of paramount importance thereto is the trust and confidence of the public in general. Consequently, the highest degree of diligence40 is expected,41 and high standards of integrity and performance are even required, of it. 42 By the nature of its functions, a bank is "under obligation to treat the accounts of its depositors with meticulous care,43 always having in mind the fiduciary nature of their relationship."44 In this case, it has been sufficiently shown that the signatures of Carmelita in the forms for pretermination of deposits are forgeries. Citibank, with its signature verification procedure, failed to detect the forgery. Its negligence consisted in the omission of that degree of diligence required of banks. The Court has held that a bank is "bound to know the signatures of its customers; and if it pays a forged check, it must be considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged."45 Such principle equally applies here. Citibank cannot label its negligence as mere mistake or human error. Banks handle daily transactions involving millions of pesos.46 By the very nature of their works the degree of responsibility, care and trustworthiness expected of their employees and officials is far greater than those of ordinary clerks and employees.47 Banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees.48 The Court agrees with the observation of the CA that Citibank, thru Account Officer San Pedro, openly courted disaster when despite noticing discrepancies in the signature and photograph of the person claiming to be Carmelita and the failure to surrender the original certificate of time deposit, the pretermination of the account was allowed. Even the waiver document was not notarized, a procedure meant to protect the bank. For not observing the degree of diligence required of banking institutions, whose business is impressed with public interest, Citibank is liable for damages. As to the interest rate, Citibank avers that the claim of the Cabamongan spouses does not constitute a loan or forbearance of money and therefore, the interest rate of 6%, not 12%, applies. The Court does not agree.

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The time deposit subject matter of herein petition is a simple loan. The provisions of the New Civil Code on simple loan govern the contract between a bank and its depositor. Specifically, Article 1980 thereof categorically provides that ". . . savings . . . deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan." Thus, the relationship between a bank and its depositor is that of a debtor-creditor, the depositor being the creditor as it lends the bank money, and the bank is the debtor which agrees to pay the depositor on demand. The applicable interest rate on the actual damages of $55,216.69, should be in accordance with the guidelines set forth in Eastern Shipping Lines, Inc. v. Court of Appeals49 to wit: I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages. II. With regard particularly to an award of interest, in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.50 Thus, in a loan or forbearance of money, the interest due should be that stipulated in writing, and in the absence thereof, the rate shall be 12% per annum counted from the time of demand. Accordingly, the stipulated interest rate of 2.562% per annum shall apply for the 182-day contract period from August 16, 1993 to February 14, 1994. For the period from the date of extra-judicial demand, September 16, 1994, until full payment, the rate of 12% shall apply. As for the intervening period between February 15, 1994 to September 15, 1994, the rate of interest then prevailing granted by Citibank shall apply since the time deposit provided for roll over upon maturity of the principal and interest.51 As to moral damages, in culpa contractual or breach of contract, as in the case before the Court, moral damages are recoverable only if the defendant has acted fraudulently or in bad faith,52 or is found guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations.53 The act of Citibank's employee in allowing the pretermination of Cabamongan spouses' account despite the noted discrepancies in Carmelita's signature and photograph, the absence of the original certificate of time deposit and the lack of notarized waiver dormant, constitutes gross negligence amounting to bad faith under Article 2220 of the Civil Code. There is no hard-and-fast rule in the determination of what would be a fair amount of moral damages since each case must be governed by its own peculiar facts. The yardstick should be that it is not palpably and scandalously excessive.54 The amount of P50,000.00 awarded by the CA is reasonable and just. Moreover, said award is deemed final and executory insofar as respondents are concerned considering that their petition for review had been denied by the Court in its final and executory Resolution dated October 17, 2001 in G.R. No. 149234. Finally, Citibank contends that the award of attorney's fees should be deleted since such award appears only in the dispositive portion of the decision of the RTC and the latter failed to elaborate, explain and justify the same. Article 2208 of the New Civil Code enumerates the instances where such may be awarded and, in all cases, it must be reasonable, just and equitable if the same were to be granted. Attorney's fees as part of damages are not meant to enrich the winning party at the expense of the losing litigant. They are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate.55 The award of attorney's fees is the exception rather than the general rule. As such, it is necessary for the court to make findings of facts and law that would bring the case within the exception and justify the grant of such award. The matter of attorney's fees cannot be mentioned only in the dispositive portion of the decision. 56 They must be clearly explained and justified by the trial court in the body of its decision. Consequently, the award of attorney's fees should be deleted. WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed Decision and Resolution are AFFIRMED with MODIFICATIONS, as follows:

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1. The interest shall be computed as follows: a. The actual damages in principal amount of $55,216.69, representing the amount of foreign currency time deposit shall earn interest at the stipulated rate of 2.5625% for the period August 16, 1993 to February 14, 1994; b. From February 15, 1994 to September 15, 1994, the principal amount of $55,216.69 and the interest earned as of February 14, 1994 shall earn interest at the rate then prevailing granted by Citibank; c. From September 16, 1994 until full payment, the principal amount of $55,216.69 and the interest earned as of September 15, 1994, shall earn interest at the legal rate of 12% per annum; 2. The award of attorney's fees is DELETED. No pronouncement as to costs. SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

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FIRST DIVISION

G.R. No. 156207

September 15, 2006

EQUITABLE PCI BANK (the Banking Entity into which Philippine Commercial International Bank was merged), petitioner, vs. ROWENA ONG, respondent.

DECISION

CHICO-NAZARIO, J.:

On 29 November 1991, Warliza Sarande deposited in her account at Philippine Commercial International (PCI) Bank Magsaysay Avenue, Santa Ana District, Davao City Branch, under Account No. 8502-00347-6, a PCI Bank General Santos City Branch, TCBT1 Check No. 0249188 in the amount of P225,000.00. Upon inquiry by Serande at PCI Bank on 5 December 1991 on whether TCBT Check No. 0249188 had been cleared, she received an affirmative answer. Relying on this assurance, she issued two checks drawn against the proceeds of TCBT Check No. 0249188. One of these was PCI Bank Check No. 073661 dated 5 December 1991 for P132,000.00 which Sarande issued to respondent Rowena Ong Owing to a business transaction. On the same day, Ong presented to PCI Bank Magsaysay Avenue Branch said Check No. 073661, and instead of encashing it, requested PCI Bank to convert the proceeds thereof into a manager's check, which the PCI Bank obliged. Whereupon, Ong was issued PCI Bank Manager's Check No. 10983 dated 5 December 1991 for the sum of P132,000.00, the value of Check No. 073661. The next day, 6 December 1991, Ong deposited PCI Bank Manager's Check No. 10983 in her account with Equitable Banking Corporation Davao City Branch. On 9 December 1991, she received a check return-slip informing her that PCI Bank had stopped the payment of the said check on the ground of irregular issuance. Despite several demands made by her to PCI Bank for the payment of the amount in PCI Bank Manager's Check No. 10983, the same was met with refusal; thus, Ong was constrained to file a Complaint for sum of money, damages and attorney's fees against PCI Bank.2 From PCI Bank's version, TCBT-General Santos City Check No. 0249188 was returned on 5 December 1991 at 5:00 pm on the ground that the account against which it was drawn was already closed. According to PCI Bank, it immediately gave notice to Sarande and Ong about the return of Check No. 0249188 and requested Ong to return PCI Bank Manager's Check No. 10983 inasmuch as the return of Check No. 0249188 on the ground that the account from which it was drawn had already been closed resulted in a failure or want of consideration for the issuance of PCI Bank Manager's Check No. 10983.3 After the pre-trial conference, Ong filed a motion for summary judgment.4 Though they were duly furnished with a copy of the motion for summary judgment, PCI Bank and its counsel failed to appear at the scheduled hearing. 5 Neither did they file any written comment or opposition thereto. The trial court thereafter ordered Ong to formally offer her exhibits in writing, furnishing copies of the same to PCI Bank which was directed to file its comment or objection.6 Ong complied with the Order of the trial court, but PCI Bank failed to file any comment or objection within the period given to it despite receipt of the same order.7 The trial court then granted the motion for summary judgment and in its Order dated 2 March 1995, it held: IN THE LIGHT OF THE FOREGOING, the motion for summary judgment is GRANTED, ordering defendant Philippine Commercial International Bank to pay the plaintiff the amount of ONE HUNDRED THIRTY-TWO THOUSAND PESOS (P132,000.00) equivalent to the amount of PCIB Manager's Check No. 10983. Set the reception of the plaintiff's evidence with respect to the damages claimed in the complaint.8 PCI Bank filed a Motion for Reconsideration which the trial court denied in its Order dated 11 April 1996.9 After the reception of Ong's evidence in support of her claim for damages, the trial court rendered its Decision10 dated 3 May 1999 wherein it ruled: IN LIGHT OF THE FOREGOIN CONSIDERATION, and as plaintiff has preponderantly established by competent evidence her claims in the Complaint, judgment in hereby rendered for the plaintiff against the defendant-bank ordering the latter: 1. To pay the plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00) in the concept of moral damages; 2. To pay the plaintiff the sum of TWENTY THOUSAND PESOS (P20,000.00) as exemplary damages; 3. To pay the plaintiff the sum of THREE THOUSAND FIVE HUNDRED PESOS (P3,500.00) representing actual expenses; 4. To pay the plaintiff the sum of TWENTY THOUSAND PESOS (P20,000.00) as and for attorney's fee's; and 5. To pay the costs.11 From this decision, PCI Bank sought recourse before the Court of Appeals. In a Decision12 dated 29 October 2002, the appellate court denied the appeal of PCI Bank and affirmed the orders and decision of the trial court.

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Unperturbed, PCI Bank then filed the present petition for review before this Court and raised the following issues: 1. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A GRAVE AND REVERSIBLE ERROR WHEN IT SUSTAINED THE LOWER COURT'S ORDER DATED 2 MARCH 1999 GRANTING RESPONDENT'S MOTION FOR SUMMARY JUDGMENT NOTWITHSTANDING THE GLARING FACT THAT THERE ARE GENUINE, MATERIAL AND FACTUAL ISSUES WHICH REQUIRE THE PRESENTATION OF EVIDENCE. 2. WHETHER OR NOT THE COURT OF APPEALS WAS IN ERROR WHEN IT SUSTAINED THE LOWER COURT'S DECISION DATED 3 MAY 1999 GRANTING THE RELIEFS PRAYED FOR IN RESPONDENT ONG'S COMPLAINT INSPITE OF THE FACT THAT RESPONDENT ONG WOULD BE "UNJUSTLY ENRICHED" AT THE EXPENSE OF PETITIONER BANK, IF PETITIONER BANK WOULD BE REQUIRED TO PAY AN UNFUNDED CHECK. 3. WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERRORS WHEN IT AFFIRMED THE COURT A QUO'S DECISIION DATED 3 MAY 1999 AWARDING DAMAGES TO RESPONDENT ONG AND HOLDING THAT RESPONDENT ONG HAD PREPONDERANTLY ESTABLISHED BY COMPETENT EVIDENCE HER CLAIMS IN THE COMPLAINT INSPITE OF THE FACT THAT THE EVIDENCE ON RECORD DOES NOT JUSTIFY THE AWARD OF DAMAGES. 4. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT AFFIRMED THE LOWER COURT'S FACTUAL FINDING IN ITS DECISION DATED 3 MAY 1999 HOLDING RESPONDENT ONG A "HOLDER IN DUE COURSE" INSPITE OF THE FACT THAT THE REQUISITE OF "GOOD FAITH" AND FOR VALUE IS LACKING AND DESPITE THE ABSENCE OF A PROPER TRIAL TO DETERMINE SUCH FACTUAL ISSUE. 5. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT UPHELD THE LOWER COURT'S DECISION DATED 3 MAY 1999 DENYING PETITIONER EPCI BANK'S COUNTERCLAIM INSPITE OF THE FACT THAT IT WAS SHOWN THAT RESPONDENT ONG'S COMPLAINT LACKS MERIT.13 We affirm the Decision of the trial court and the Court of Appeals. The provision on summary judgment is found in Section 1, Rule 35 of the 1997 Rules of Court: SECTION 1. Summary judgment for claimant. A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto has been served, move with supporting affidavits, depositions or admissions for a summary judgment in his favor upon all or any part thereof. Thus, it has been held that a summary judgment is proper where, upon a motion filed after the issues had been joined and on the basis of the pleadings and papers filed, the court finds that there is no genuine issue as to any material fact to except as to the amount of damages. A genuine issue has been defined as an issue of fact which calls for the presentation of evidence, as distinguished from an issue which is sham, fictitious, contrived and patently unsubstantial so as not to constitute a genuine issue for trial.14 A court may grant summary judgment to settle expeditiously a case if, on motion of either party, there appears from the pleadings, depositions, admissions, and affidavits that no important issues of fact are involved, except the amount of damages.15 Rule 35, Section 3, of the Rules of Court provides two requisites for summary judgment to be proper: (1) there must be no genuine issue as to any material fact, except for the amount of damages; and (2) the party presenting the motion for summary judgment must be entitled to a judgment as a matter of law.16 Certainly, when the facts as pleaded appear uncontested or undisputed, then there's no real or genuine issue or question as to the facts, and summary judgment is called for.17 By admitting it committed an error, clearing the check of Sarande and issuing in favor of Ong not just any check but a manager's check for that matter, PCI Bank's liability is fixed. Under the circumstances, we find that summary judgment was proper and a hearing would serve no purpose. That summary judgment is appropriate was incisively expounded by the trial court when it made the following observation: [D]efendant-bank had certified plaintiff's PCIB Check No. 073661 and since certification is equivalent to acceptance, defendant-bank as drawee bank is bound on the instrument upon certification and it is immaterial to such liability in favor of the plaintiff who is a holder in due course whether the drawer (Warliza Sarande) had funds or not with the defendant-bank (Security vs. State Bank, 154 N.W. 282) or the drawer was indebted to the bank for more than the amount of the check (Nat. Bank vs. Schmelz, Nat. Bank, 116 S.E. 880) as the certifying bank as all the liabilities under Sec. 62 of the Negotiable Instruments Law which refers to liability of acceptor (Title Guarantee vs. Emadee Realty Corp., 240 N.Y. 36). It may be true that plaintiff's PCIB Check No. 073661 for P132,000.00 which was paid to her by Warliza Sarande was actually not funded but since plaintiff became a holder in due course, defendant-bank cannot interpose a defense of want or lack of consideration because that defense is equitable or personal and cannot prosper against a holder in due course pursuant to Section 28 of the Negotiable Instruments Law. Therefore, when the aforementioned check was endorsed and presented by the plaintiff and certified to and accepted by defendant-bank in the purchase of PCIB Manager's Check No. 1983 in the amount of P132,000.00, there was a valid consideration.18 The property of summary judgment was further explained by this Court when it pronounced that:

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The theory of summary judgment is that although an answer may on its face appear to tender issues requiring trial yet if it is demonstrated by affidavits, depositions, or admissions that those issues are not genuine, but sham or fictitious, the Court is unjustified in dispensing with the trial and rendering summary judgment for plaintiff. The court is expected to act chiefly on the basis of the affidavits, depositions, admissions submitted by the movant, and those of the other party in opposition thereto. The hearing contemplated (with 10-day notice) is for the purpose of determining whether the issues are genuine or not, not to receive evidence on the issues set up in the pleadings. A hearing is not thus de riguer. The matter may be resolved, and usually is, on the basis of affidavits, depositions, admissions. This is not to say that a hearing may be regarded as a superfluity. It is not, and the Court has plenary discretion to determine the necessity therefore.19 The second and fourth issues are inter-related and so they shall be resolved together. The second issue has reference to PCI Bank's claim of unjust enrichment on the part of Ong if it would be compelled to make good the manager's check it had issued. As asserted by PCI Bank under the fourth issue, Ong is not a holder in due course because the manager's check was drawn against a closed account; therefore, the same was issued without consideration. On the matter of unjust enrichment, the fundamental doctrine of unjust enrichment is the transfer of value without just cause or consideration. The elements of this doctrine are: enrichment on the part of the defendant; impoverishment on the part of the plaintiff; and lack of cause. The main objective is to prevent one to enrich himself at the expense of another.20 It is based on the equitable postulate that it is unjust for a person to retain benefit without paying for it. 21 It is well to stress that the check of Sarande had been cleared by the PCI Bank for which reason the former issued the check to Ong. A check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account.22 Having cleared the check earlier, PCI Bank, therefore, became liable to Ong and it cannot allege want or failure of consideration between it and Sarande. Under settled jurisprudence, Ong is a stranger as regards the transaction between PCI Bank and Sarande.23 PCI Bank next insists that since there was no consideration for the issuance of the manager's check, ergo, Ong is not a holder in due course. This claim is equally without basis. Pertinent provisions of the Negotiable Instruments Law are hereunder quoted: SECTION 52. What constitutes a holder in due course. A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face; (b) That he became the holder of it before it was overdue, and without notice it had been previously dishonored, if such was the fact; (c) That he took it in good faith and for value; (d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. The same law provides further: Sec. 24. Presumption of consideration. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value. Sec. 26. What constitutes holder for value. Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who become such prior to that time. Sec. 28. Effect of want of consideration. Absence or failure of consideration is a matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise. Easily discernible is that what Ong obtained from PCI Bank was not just any ordinary check but a manager's check. A manager's check is an order of the bank to pay, drawn upon itself, committing in effect its total resources, integrity and honor behind its issuance. By its peculiar character and general use in commerce, a manager's check is regarded substantially to be as good as the money it represents.24 A manager's check stands on the same footing as a certified check.25 The effect of certification is found in Section 187, Negotiable Instruments Law. Sec. 187. Certification of check; effect of. Where a check is certified by the bank on which it is drawn, the certification is equivalent to an acceptance.26 The effect of issuing a manager's check was incontrovertibly elucidated when we declared that:

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A manager's check is one drawn by the bank's manager upon the bank itself. It is similar to a cashier's check both as to effect and use. A cashier's check is a check of the bank's cashier on his own or another check. In effect, it is a bill of exchange drawn by the cashier of a bank upon the bank itself, and accepted in advance by the act of its issuance. It is really the bank's own check and may be treated as a promissory note with the bank as a maker. The check becomes the primary obligation of the bank which issues it and constitutes its written promise to pay upon demand. The mere issuance of it is considered an acceptance thereof. x x x.27 In the case of New Pacific Timber & Supply Co., Inc. v. Seneris28: [S]ince the said check had been certified by the drawee bank, by the certification, the funds represented by the check are transferred from the credit of the maker to that of the payee or holder, and for all intents and purposes, the latter becomes the depositor of the drawee bank, with rights and duties of one in such situation. Where a check is certified by the bank on which it is drawn, the certification is equivalent to acceptance. Said certification "implies that the check is drawn upon sufficient funds in the hands of the drawee, that they have been set apart for its satisfaction, and that they shall be so applied whenever the check is presented for payment. It is an understanding that the check is good then, and shall continue good, and this agreement is as binding on the bank as its notes circulation, a certificate of deposit payable to the order of depositor, or any other obligation it can assume. The object of certifying a check, as regards both parties, is to enable the holder to use it as money." When the holder procures the check to be certified, "the check operates as an assignment of a part of the funds to the creditors." Hence, the exception to the rule enunciated under Section 63 of the Central Bank Act to the effect "that a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount equal to the amount credited to his account" shall apply in this case x x x. By accepting PCI Bank Check No. 073661 issued by Sarande to Ong and issuing in turn a manager's check in exchange thereof, PCI Bank assumed the liabilities of an acceptor under Section 62 of the Negotiable Instruments Law which states: Sec. 62. Liability of acceptor. The acceptor by accepting the instruments engages that he will pay it according to the tenor of his acceptance; and admits (a) The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument; and (b) The existence of the payee and his then capacity to indorse. With the above jurisprudential basis, the issues on Ong being not a holder in due course and failure or want of consideration for PCI Bank's issuance of the manager's check is out of sync. Section 2, of Republic Act No. 8791, The General Banking Law of 2000 decrees: SEC. 2. Declaration of Policy. The State recognizes the vital role of banks in providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy. In Associated Bank v. Tan,29 it was reiterated: "x x x the degree of diligence required of banks is more than that of a good father of a family where the fiduciary nature of their relationship with their depositors is concerned." Indeed, the banking business is vested with the trust and confidence of the public; hence the "appropriate standard of diligence must be very high, if not the highest degree of diligence." Measured against these standards, the next question that needs to be addressed is: Did PCI Bank exercise the requisite degree of diligence required of it? From all indications, it did not. PCI Bank distinctly made the following uncontested admission: 1. On 29 November 1991, one Warliza Sarande deposited to her savings account with PCI Bank's Magsaysay Avenue Branch, TCBT-General Santos Branch Check No. 0249188 for P225,000.00. Said check, however, was inadvertently sent by PCI Bank through local clearing when it should have been sent through inter-regional clearing since the check was drawn at TCBT-General Santos City. 2. On 5 December 1991, Warliza Sarande inquired whether TCBT Check No. 0249188 had been cleared. Not having received any advice from the drawee bank within the regular clearing period for the return of locally cleared checks, and unaware then of the error of not having sent the check through inter-regional clearing, PCI Bank advised her that Check No. 024188 is treated as cleared. x x x.30 (Emphasis supplied.) From the foregoing, it is palpable and readily apparent that PCI Bank failed to exercise the highest degree of care 31 required of it under the law. In the case of Philippine National Bank v. Court of Appeals,32 we declared:

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The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society. Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business and commerce, banks have attained an ubiquitous presence among the people, who have come to regard them with respect and even gratitude and, most of all, confidence. Having settled the other issues, we now resolve the question on the award of moral and exemplary damages by the trial court to the respondent. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act or omission.33 The requisites for an award of moral damages are welldefined, thus, firstly, evidence of besmirched reputation or physical, mental or psychological suffering sustained by the claimant; secondly, a culpable act or omission factually established; thirdly, proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by the claimant; and fourthly, that the case is predicated on any of the instances expressed or envisioned by Article 221934 and Article 222035 of the Civil Code. All these elements are present in the instant case.36 In the first place, by refusing to make good the manager's check it has issued, Ong suffered embarrassment and humiliation arising from the dishonor of the said check.37 Secondly, the culpable act of PCI Bank in having cleared the check of Serande and issuing the manager's check to Ong is undeniable. Thirdly, the proximate cause of the loss is attributable to PCI Bank. Proximate cause is defined as that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred.38 In this case, the proximate cause of the loss is the act of PCI Bank in having cleared the check of Sarande and its failure to exercise that degree of diligence required of it under the law which resulted in the loss to Ong. On exemplary damages, Article 2229 of the Civil Code states: Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. The law allows the grant of exemplary damages to set an example for the public good. The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society. Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business and commerce, banks have attained an ubiquitous presence among the people, who have come to regard them with respect and even gratitude and most of all, confidence. For this reason, banks should guard against injury attributable to negligence or bad faith on its part. 39 Without a doubt, it has been repeatedly emphasized that since the banking business is impressed with public interest, of paramount importance thereto is the trust and confidence of the public in general. Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are even required of it.40 Having failed in this respect, the award of exemplary damages is warranted. Article 2216 of the Civil Code provides: ART. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case. Based on the above provision, the determination of the amount to be awarded (except liquidated damages) is left to the sound discretion of the court according to the circumstances of each case. 41 In the case before us, we find that the award of moral damages in the amount of P50,000.00 and exemplary damages in the amount of P20,000.00 is reasonable and justified. With the above disquisition, there is no necessity of further discussing the last issue on the PCI Bank's counterclaim based on the supposed lack of merit of Ong's complaint. WHEREFORE, premises considered, the Petition is DENIED and the Decision of the Court of Appeals dated 29 October 2002 in CAG.R. CV No. 65000 affirming the Decision dated 3 may 1999, of the Regional Trial Court of Davao City, Branch 14, in Civil Case No. 21458-92, are AFFIRMED. SO ORDERED.
Panganiban, C.J., Chairperson, Ynares-Santiago, Austria-Martinez, Callejo, Sr., J.J., concur.

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SECOND DIVISION

G.R. No. 148196 September 30, 2005

BPI FAMILY BANK, Petitioners, vs. EDGARDO BUENAVENTURA, MYRNA LIZARDO and YOLANDA TICA, Respondent.

x--------------------------x

G.R. No. 148259

EDGARDO BUENAVENTURA, MYRNA LIZARDO and YOLANDA TICA, Petitioners, vs. BPI FAMILY BANK, Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us are two consolidated petitions for review on certiorari under Rule 45 of the Rules of Court assailing the Decision1 of the Court of Appeals (CA) dated November 27, 2000 in CA-G.R. CV No. 53962, which affirmed with modification the Decision dated August 11, 1995 of the Regional Trial Court, Branch 25, Manila (Manila RTC); and the CA Resolution dated May 3, 2001, which denied the parties separate motions for reconsideration. The factual background of the case is as follows: On May 23, 1990, Edgardo Buenaventura, Myrna Lizardo and Yolanda Tica (Buenaventura, et al.), all officers of the International Baptist Church and International Baptist Academy in Malabon, Metro Manila, filed a complaint for "Reinstatement of Current Account/Release of Money plus Damages" against BPI Family Bank (BPI-FB) before the Manila RTC, docketed as Civil Case No. 9053154.2 They alleged that: on August 30, 1989, they accepted from Amado Franco BPI-FB Check No. 129004 dated August 29, 1989 in the amount of P500,000.00, jointly issued by Eladio Teves and Joseph Teves;3 they opened Current Account No. 807-065314-0 with the BPI-FB Branch at Bonifacio Market, Edsa, Caloocan City and deposited the check as initial deposit; the check was subsequently cleared and the amount was credited to their Current Account; on September 3, 1989, they drew a check in the amount of P10,171.50 and pursuant to normal banking procedure the check was honored and debited from their Current Account, leaving a balance of P490,328.50; on September 4, 1989, they drew another check in the amount of P46,189.60; instead of debiting the said amount against their Current Account, it was debited, without their knowledge and consent, against their Savings Account No. 08-95332-5 with the same branch; on September 9, 1989, they drew a check for P91,270.00 which, upon presentment for payment, was dishonored for the reason "account closed," in spite of the balance in the Current Account of P490,328.50; they thereafter learned from BPI-FB that their Current Account had been frozen upon instruction of Severino P. Coronacion, Vice-President of BPI-FB on the ground that the source of fund was illegal or unauthorized; they demanded the reinstatement of the account, but BPI-FB refused. On June 20, 1990, BPI-FB filed a motion to dismiss on the ground of litis pendentia, alleging that there is a pending case for recovery of sum of money arising from the BPI-FB Check No. 129004 dated August 29, 1989 before the Regional Trial Court (RTC), Branch 146, Makati4 and Buenaventura is one of the defendants therein.5 Buenaventura, et al. opposed the motion to dismiss on the ground that there is no identity of parties, rights asserted and reliefs prayed between the two cases.6 On October 10, 1990, the Manila RTC denied the motion to dismiss, ruling that there can be no res judicata between the two cases since the parties are different and the causes of action are not the same.7 On December 10, 1990, BPI-FB filed its answer alleging that: the check received by Buenaventura, et al. from Amado Franco was drawn by Eladio Teves and Joseph Teves against the Current Account of the Tevesteco Arrastre Stevedoring Co., Inc. (Tevesteco); the funds in the said Tevesteco account allegedly consisted mainly of funds in the amount of P80,000,000.00 transferred to it from another account belonging to the First Metro Investment Corporation (FMIC); such transfer of funds was effected on the basis of an Authority to Debit bearing the signatures of certain officers of FMIC; upon its investigation, BPI-FB found that the signatures in the Authority to Debit were forged; before this, however, Tevesteco had already issued several checks against its Current Account, one of which is the BPI-FB Check No. 129004 received by Buenaventura, et al. from Amado Franco, after a series of indorsements; it has the right to consider the Current Account of Buenaventura, et al., which is funded from BPI-FB Check No. 129004, as closed and to refuse any further withdrawal from the same; assuming that the forgery claim of FMIC is untrue and incorrect, it is the right of the BPI-FB, as a matter of protecting its interests, to freeze their account or to hold it in suspense and not to allow any withdrawals therefrom in the meantime that the issue of forgery remains unsettled; FMIC has instituted another civil action, presently pending appeal, against BPIFB and several other defendants for the recovery of the P80,000,000.00 transferred from the formers account to Tevestecos account.8 Following trial on the merits, on August 11, 1995, the Manila RTC rendered its decision, finding that: BPI-FB had no right to unilaterally freeze the deposits of Buenaventura, et al. since the latter had no participation in any fraud that may have attended the

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prior fund transfers from FMIC to Tevesteco; as holders in good faith and for value of the BPI-FB Check No. 129004, their rights to the sum embodied in the said check should have been respected; BPI-FBs unilateral action of freezing the Current Account amounted to an unlawful confiscation of their property without due process. The dispositive portion of the RTC decision reads as follows: WHEREFORE, in view of the foregoing judgment is rendered in favor of the plaintiff and against the defendant bank and the latter is ordered as follows: 1. To pay the plaintiff the sum of P490,328.50 representing the balance of the plaintiffs deposit under Account No. 807-065-313-0 which was unlawfully frozen by the bank and finally debited against said account with legal rate of interest from date of closure; 2. To pay the sum of P200,000.00 as moral damages; 3. To pay the amount of P200,000.00 as exemplary damages to serve as an example and lesson to serve as a deterrent for similar action which the bank may take against its depositors in the future; 4. To pay the sum of P50,000.00 as attorneys fees. SO ORDERED.9 Dissatisfied, BPI-FB appealed to the CA. It alleged that: the case should have been dismissed for lack of cause of action because it is the International Baptist Academy which is the owner of the funds deposited with BPI-FB and therefore the real party-in-interest, although the account is in the name of Buenaventura, et al.; the RTC should not have ordered the payment of the balance of the Current Account of Buenaventura, et al. because the latter were interested only in the reinstatement of their Current Account; the provisions of the Negotiable Instruments Law should not have been applied by the RTC to support its position that Buenaventura, et al. are the owners of the funds in their Current Account; BPI-FB is entitled to freeze the account of Buenaventura, et al. and to disallow any withdrawals therefrom as a measure to protect its interest; BPI-FB, not Buenaventura, et al., is entitled to damages. On November 27, 2000, the CA affirmed the decision of the Manila RTC, holding that BPI-FB did not act in accordance with law. 10 It ruled that the relationship between the bank and the depositor is that of debtor and creditor and, as such, BPI-FB could not lawfully refuse to make payments on the checks drawn and issued by Buenaventura, et al., provided only that there are funds available in the latters deposit. It further declared that BPI-FB is not justified in freezing the amounts deposited by Buenaventura, et al. for suspicion of being "illegal" or "unauthorized" as a result of the claimed fraud perpetuated against FMIC because: (a) it has not been sufficiently shown that the funds in the account of Buenaventura, et al. were derived exclusively from the alleged P80,000,000.00 unlawfully transferred from the funds of FMIC or that the deposit under the name of Tevesteco consisted exclusively of the said P80,000,000.00 debited from FMICs account; and (b) there is no clear proof of any involvement of Buenaventura, et al., the International Baptist Church or International Baptist Academy in the alleged irregularities attending the fund transfer from FMIC to Tevesteco. The CA also found unmeritorious BPI-FBs claim that Buenaventura, et al. have no cause of action since the International Baptist Academy is the real party-in-interest. It held that since it is undisputed that it is the Current Account of Buenaventura, et al. which was frozen and closed by BPI-FB, then the former are the parties-in-interest in the reopening of the said account. It found no error in the Manila RTCs order that BPI-FB pay the amount of P490,328.50 plus interest directly to Buenaventura, et al. since the reinstatement of the Current Account would mean the same thing as the payment of the balance; Buenaventura, et al. would necessarily have the right to withdraw their deposit if and when they see it fit. Furthermore, the CA held that the RTCs disposition falls under the general prayer of Buenaventura, et al. for such other reliefs as may be just and equitable under the attendant circumstances. With regard to award of damages, the CA sustained the award of moral damages and attorneys fees, holding that BPI-FBs actuations were established to have caused Buenaventura, et al. to incur the distrust of their Baptist brethren, besides suffering mental anguish, serious anxiety, wounded feelings, and moral shock but found no basis for the award of exemplary damages of P200,000.00 for lack of showing that BPI-FB was not animated by any wanton, fraudulent, reckless, oppressive or malevolent intent. Both parties filed separate motions for reconsideration. Buenaventura, et al. sought reconsideration of the deletion of the award of exemplary damages.11 On the other hand, BPI-FB reiterated its argument that the International Baptist Academy is the real party-ininterest. It also assailed the findings and conclusions of the CA.12 On May 3, 2001, the CA denied both motions for reconsideration.13 Hence, the present two consolidated petitions for review on certiorari. In G.R No. 148196, BPI-FB ascribes six errors upon the CA, to wit: I. The Honorable Court of Appeals committed a reversible error in holding that the respondents are the real parties-in-interest in this case contrary to the admissions of respondents themselves that it is the International Baptist Academy who is the owner of the funds in question and hence it is and out to be the real party in interest in this case. II. The Honorable Court of Appeals committed a grave abuse of discretion in not dismissing respondents complaint for lack of cause of action.

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III. The Honorable Court of Appeals committed a reversible error in NOT holding, based on a misapprehension of facts that BPI-FB is entitled to freeze respondents account and to disallow any withdrawal therefrom as a measure to protect its interest. IV. The Honorable Court of Appeals committed a reversible error in holding, based on a misapprehension of facts, that it has not been sufficiently shown that the funds in deposit with BPI-FB under the name of the respondents were derived exclusively from the alleged 80 million pesos unlawfully transferred from the funds of FMIC or that the deposit under the name of Tevesteco consisted exclusively of the said 80 million pesos debited from FMICs account. V. The Honorable Court of Appeals committed a grave abuse of discretion in NOT upholding the position of BPI-FB on the freezing of respondents current account when it held that there was no clear proof of any involvement by the respondents with the alleged irregularities attending the fund transfer from FMIC to Tevesteco. VI. The Honorable Court of Appeals committed a grave abuse of discretion, in holding, in effect, that there is nothing wrong with the Lower Courts order directing BPI-FB to pay to respondents directly the balance of their account plus interest although their prayer in their complaint was only to reinstate their current account.14 Anent the first and second grounds, BPI-FB maintains that the complaint should have been dismissed for lack of cause of action because Buenaventura et al. admit that the International Baptist Academy is the owner of the funds in question and therefore the real party-in-interest to prosecute the action. On the third ground, BPI-FB asserts that it has the right to consider the account of Buenaventura, et al. as frozen and to refuse any withdrawals from the same because of the forgery claim of FMIC. Assuming the forgery claim of FMIC is true and correct, the amount transferred from FMICs account to Tevestecos account is the money of BPI-FB under the principle that a bank is deemed to have disbursed its own funds. It submits that as an original owner who is restored in possession of stolen property, it has a better right over such property than a mere transferee no matter how innocent the latter may be. Concerning the fourth ground, BPI-FB submits that ample proof was presented by it that the deposit under the name of Tevesteco consisted exclusively of the P80,000,000.00 debited from FMICs account and the funds in deposit with BPI-FB under the name of Buenaventura, et al. were derived exclusively from the P80,000,000.00 unlawfully transferred from the funds of FMIC. With regard to the fifth ground, BPI-FB concedes that there is no clear proof of any involvement by Buenaventura, et al. in the alleged irregularities attending the fund transfer from FMIC to Tevesteco. It insists, however, that the freezing of the account was triggered by the forgery claim of FMIC and the unauthorized fund transfer to Tevesteco based on the principle that a bank is deemed to have disbursed its own funds, and not its depositors, where the authority for such disbursement is a forgery and null and void. It had the right to set up its ownership of the money as against that of Buenaventura, et al. and to refuse to return the same to them. As to the sixth ground, BPI-FB points out that Buenaventura, et al. originally prayed in the alternative for the reinstatement of their Current Account or for payment of the balance remaining in said account but they subsequently chose to delete that portion praying for the payment of the balance of their account. It submits that Buenaventura, et al. deliberately did this to sidestep the other pending case filed against the suspected perpetrators of the fraud, including Amado Franco and Buenaventura, before RTC, Branch 146, Makati. In G.R. No. 148259, Buenaventura, et al. anchor their petition on a sole ground, to wit: The Honorable Court of Appeals has decided the case in a way not in accord with law and applicable jurisprudence in the deletion of the award of exemplary damages granted by the court a quo.15 They submit that BPI-FB acted in a wanton, reckless, oppressive and malevolent manner in freezing, and subsequently closing, their account without prior notification. They insist that BPI-FB failed in its obligation, as an entity engaged in business affected with public interest, to treat the accounts of its depositors with meticulous care, having in mind the fiduciary nature of their relationship. Moreover, as if to compound its reckless conduct, BPI-FB declared itself the owner of the money which the depositors have placed in its care, freezing and later closing the depositors account, all before due notice and without first giving the latter the opportunity to properly present their side or at least sufficient time to direct their course of action, like refraining from issuing any check, to eventually save themselves from any embarrassment and/or possible criminal prosecution for estafa or violation of Batas Pambansa Blg. 22. We rule in favor of Buenaventura, et al. It is elementary that it is only in the name of a real party-in-interest that a civil suit may be prosecuted. Under Section 2, Rule 3 of the Rules of Civil Procedure, a real party-in-interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. "Interest" within the meaning of the rule means material interest, an interest in issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. 16 One having no right or interest to protect cannot invoke the jurisdiction of the court as a party plaintiff in an action. 17 To qualify a person to be a real party-in-interest in whose name an action must be prosecuted, he must appear to be the present real owner of the right sought to be enforced.18 Since a contract may be violated only by the parties thereto as against each other, in an action upon that contract, the real parties-in-interest, either as plaintiff or as defendant, must be parties to the said contract.19

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In the present case, Buenaventura, et al. are the real parties-in-interest. They are the parties who contracted with BPI-FB with regard to the Current Account. While the funds were used for purposes of the International Baptist Church and the International Baptist Academy, it must be noted that the Current Account is in the name of Buenaventura, et al. They are the signatories of the check which was dishonored by BPI-FB upon presentment and the ones who will be held accountable for the nonpayment or dishonor of any check they issued. Thus, they are the real parties-in-interest to enforce the terms of the contract of deposit with BPI-FB. Furthermore, BPI-FB has no unilateral right to freeze the current account of Buenaventura, et al. based on the suspicion that the funds in the latters account are illegal or unauthorized having been sourced from the unlawful transfer of funds from the account of FMIC to Tevesteco and disallow any withdrawal therefrom to allegedly protect its interest. Needless to stress, the contract between a bank and its depositor is governed by the provisions of the Civil Code on simple loan. 20 Thus, there is a debtor-creditor relationship between a bank and its depositor. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the bank agrees to pay the depositor on demand. The savings or current deposit agreement between the bank and the depositor is the contract that determines the rights and obligations of the parties. Every bank that issues checks for the use of its customers should know whether or not the drawer's signature thereon is genuine, whether there are sufficient funds in the drawers account to cover checks issued, and it should be able to detect alterations, erasures, superimpositions or intercalations thereon, for these instruments are prepared, printed and issued by itself, it has control of the drawer's account, and it is supposed to be familiar with the drawer's signature. It should possess appropriate detecting devices for uncovering forgeries and/or alterations on these instruments. Unless a forgery or alteration is attributable to the fault or negligence of the drawer himself, the remedy of the drawee bank that negligently clears a forged and/or altered check for payment is against the party responsible for the forgery or alteration, otherwise, it bears the loss.21 There is nothing inequitable in such a rule for if in the regular course of business the check comes to the drawee bank which, having the opportunity to ascertain its character, pronounces it to be valid and pays it, as in this case, it is not only a question of payment under mistake, but payment in neglect of duty which the commercial law places upon it, and the result of its negligence must rest upon it.22 Having been negligent in detecting the forgery prior to clearing the check, BPI-FB should bear the loss and cant shift the blame to Buenaventura, et al. having failed to show any participation on their part in the forgery. BPI-FB fails to point any circumstance which should have put Buenaventura, et al. on inquiry as to the why and wherefore of the possession of the check by Amado Franco. Buenaventura, et al. were not privies to any transaction involving FMIC, Tevesteco or Franco. They thus had no obligation to ascertain from Franco what the nature of the latters title to the checks was, if any, or the nature of his possession. They cannot be guilty of gross neglect amounting to legal absence of good faith, absent any showing that there was something amiss about Francos acquisition or possession of the check, which was payable to bearer.23 Thus, the fact that the funds in deposit with BPI-FB under the name of Buenaventura, et al. were allegedly derived exclusively from the alleged P80,000,000.00 unlawfully transferred from the funds of FMIC or that the deposit under the name of Tevesteco consisted allegedly exclusively of the said P80,000,000.00 debited from FMICs account is immaterial. These circumstances cannot be used against a party not privy to the forgery. There is no merit to the claim that the CA erred in affirming the RTCs order directing BPI-FB to pay the balance of their account plus interest although the prayer was only to reinstate their Current Account. The complaint does contain a general prayer "for such other relief as may be just and equitable in the premises." And this general prayer is broad enough "to justify extension of a remedy different from or together with the specific remedy sought."24 Indeed, a court may grant relief to a party, even if the party awarded did not pray for it in his pleadings.25 As to the prayer of Buenaventura, et al. for exemplary damages, the Court finds that the CA erred in deleting the award of exemplary damages. The law allows the grant of exemplary damages to set an example for the public good. 26 The business of a bank is affected with public interest; thus, it makes a sworn profession of diligence and meticulousness in giving irreproachable service.27 For this reason, the bank should guard against injury attributable to negligence or bad faith on its part.28 The award of exemplary damages is proper as a warning to BPI-FB and all concerned not to recklessly disregard their obligation to exercise the highest and strictest diligence in serving their depositors. However, the award should be in a reduced amount of P50,000.00 since exemplary damages are imposed not to enrich one party or impoverish another but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions.29 In summation, the Court reminds BPI-FB that the banking sector must at all times maintain a high level of meticulousness, always having in mind the fiduciary nature of its relationship with its depositors.30 This fiduciary relationship means that the banks obligation to observe "high standards of integrity and performance" is deemed written into every deposit agreement between a bank and its depositor. Failure to comply with this standard shall render a bank liable to its depositors for damages. WHEREFORE, the petition in G.R. No. 148196 is DENIED and the petition in G.R. No. 148259 is GRANTED. The assailed Decision dated November 27, 2000 and Resolution dated May 3, 2001 of the Court of Appeals in CA-G.R. CV No. 53962, which affirmed with modification the Decision rendered by the Regional Trial Court, Branch 25, Manila, dated August 11, 1995 in Civil Case No. 90-53154, are hereby AFFIRMED with the modification that BPI Family Bank is directed to pay Buenaventura, et al. the amount of P50,000.00 as exemplary damages. Costs against BPI Family Bank. SO ORDERED.

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MA. ALICIA AUSTRIA-MARTINEZ

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Associate Justice

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THIRD DIVISION

G.R. No. 160843

July 11, 2006

CHINA BANKING CORPORATION, petitioner, vs. MARIA G. LAGON, represented by Armando G. Lagon and/or Jose Lagon, Jr., respondent.

DECISION

QUISUMBING, J.:

This petition for review assails the Decision1 dated August 21, 2003 of the Court of Appeals in CA-G.R. CV No. 60853, which reversed and set aside the Joint Decision2 dated April 3, 1998 of the Regional Trial Court of Bayombong, Nueva Vizcaya, Branch 27, in Civil Cases Nos. 5158 and 5192, and the Resolution3 dated November 14, 2003, denying reconsideration. Representatives of Maria Lagon (the Lagons) in her behalf as the owner of three parcels of land covered by Transfer Certificates of Title (TCT) Nos. T-56875 and T-11593 and Original Certificate of Title (OCT) No. P-1228, filed two complaints docketed as Civil Case No. 5158 and Civil Case No. 5192. Both were filed by the Lagons against Jao Bio Tong, China Banking Corporation (CBC) and the Acting Provincial Sheriff of Nueva Vizcaya. While Civil Case No. 5158 involved lots covered by TCT Nos. T-56875 and T-11593, Civil Case No. 5192 involves only a lot covered by OCT No. P-1228, both put in issue the authenticity of the Special Power of Attorney dated May 13, 1983 purportedly executed by Maria Lagon in favor of Jao and, hence the validity of the mortgage over the lots covered by the said titles executed by Jao on behalf of Maria and in favor of CBC. The Lagons prayed for the declaration of nullity of the special power of attorney allegedly executed by Maria in favor of Jao and the nullity of the real estate mortgage executed by Jao to CBC. They also asked for the issuance of an injunctive writ and damages. Eventually the two cases were heard jointly. For their part, Jao and CBC insist the signature of Maria in the special power of attorney was authentic. In response, CBC filed a counterclaim for the payment of the loans of Maria and damages. CBC also filed a cross-claim against Jao. During trial the following facts were established: Sometime in 1981, Jao asked for credit accommodation from petitioner for P300,000 to be secured by a parcel of land under TCT No. T-30817 in Mariveles Street, Quezon City. The land was in the name of Maria Lagon. Jao represented that he had a special power of attorney, which he used previously to mortgage the same property to Metropolitan Bank and Trust Company (Metrobank). He proposed that the proceeds of the loan be used to pay P83,496.21 to Metrobank. Petitioner paid the Metrobank loan and the mortgage in favor of Metrobank was cancelled. Subsequently, petitioner granted Jao a loan line of P1,000,000, secured by a mortgage on the lot covered by TCT No. T-30817. He first borrowed P300,000. Under the same loan line, Jao availed of four additional loans, P300,000 on June 22, 1983; P500,000 on June 22, 1983; P50,000 on September 5, 1983; and P50,000 on December 12, 1983. The proceeds of the loan were applied to the obligations of respondent Maria with the Rural Bank of Ilagan, Inc. and of Jao with the Vizcaya Savings and Loan Association, Inc. The latter was secured by mortgages over the lots covered by TCT Nos. T-56875 and T-11593, both owned by Maria. On July 28, 1983, the property under TCT No. T-30817 was substituted with three parcels of land covered by TCT Nos. T-56875 and T11593 and OCT No. P-1228, the herein contested three parcels. Jao presented two special powers of attorney to mortgage the three parcels of land. The loans of Maria and Jao matured but were unpaid. Thus, petitioner CBC prepared petitions for extra-judicial foreclosure of the mortgaged properties, naming Maria and Jao as defendants. However, no foreclosure took place because the Regional Trial Court of Bayombong, Nueva Vizcaya, Branch 27, upon filing of the Lagons, issued a temporary restraining order preventing the holding of the auction sale.4 Meanwhile, Jao died while the cases were still on trial before Branch 27. Respondent Maria Lagon died in 1995. On April 3, 1998, Branch 27 dismissed the complaints finding that there was sufficient evidence that the signatures were authentic. The trial court ruled as follows: WHEREFORE, judgment is hereby rendered in favor of defendants China Banking Corporation (CBC) and Jao Bio Tong ordering: (1) the dismissal of the complaint against both defendants and the cross-claim of defendant CBC against Jao; (2) ordering the plaintiff to pay to the defendant CBC the sum of P19,180,331.14 which is the total amount of the plaintiff's obligation under all the Promissory Notes (Exhibits "118-CBC", "119-CBC" and "120-CBC") plus the late payment penalty of 1/10 of 1% of the total amount due and the interest at 26% per annum until all the said obligation is fully paid, or, if the plaintiff can not pay this sum, and the penalty for late payment and the interest, ordering the sale of the lots covered by TCT Nos. T-56875 and 11593 belonging to the plaintiff and the foreclosure of the lot covered by OCT No. P-1228 also belonging to the plaintiff and the proceeds thereof applied to the payment of the above-stated obligation in its totality;

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(3) if after the sale of the mortgaged property, there is still a deficiency on the above-stated obligation, ordering the plaintiff to pay such deficiency; (4) ordering the plaintiff to pay to the defendant bank CBC the sum of P50,000.00 as and for attorney's fees; (5) ordering the plaintiff to pay to the defendant bank CBC the sum of P42,073.20 as actual damages; (6) ordering the plaintiff to pay the costs of the suit. SO ORDERED.5 On appeal, the Court of Appeals on August 21, 2003, reversed and set aside the decision of the trial court and declared the special powers of attorney and the real estate mortgages null and void. The Court of Appeals held that Jao and petitioner failed to establish the due execution and authenticity of the special powers of attorney because Jao admitted that these were notarized without the personal appearance of respondent before the notary public. The Court of Appeals gave credence to the testimony of respondent's expert witness, NBI Questioned Document Examiner Bienvenido Albacea over the testimony of petitioner's expert witness, Atty. Desiderio A. Pagui. Petitioner's motion for reconsideration was denied. In this petition, petitioner raises the following issues: I. THE TESTIMONY OF PRIVATE PRACTISING DOCUMENT EXAMINER, ATTY. DESIDERIO PAGUI, AS AGAINST THAT OF THE NBI QUESTIONED EXAMINER BIENVENIDO ALBACEA, OUGHT TO HAVE BEEN GIVEN SUPERIOR CREDENCE AND GREATER WEIGHT ON APPEAL, BECAUSE: (a) THE TRIAL COURT IS IN A BETTER POSITION TO EXAMINE THE REAL EVIDENCE, AND OBSERVE THE DEMEANOR OF THE WITNESSES, AND CAN THEREFORE DISCERN IF THEY ARE TELLING THE TRUTH OR NOT. (b) THE CREDIBILITY OF ATTY. DESIDERIO PAGUI AS AN EXPERT ON QUESTIONED DOCUMENTS WAS NOT EVEN RAISED AS AN ISSUE IN THE APPEAL BRIEF OF RESPONDENT MARIA LAGON. (c) IN CONTRAST, THE EXAMINATION CONDUCTED BY NBI DOCUMENT EXAMINER ALBACEAi. USED STANDARDS THAT WERE NOT ADEQUATE, APPROPRIATE AND CONTEMPORANEOUS; ii. DID NOT COMPLY WITH THE FOUR (4) REQUIREMENTS TO THE "PROPER CONDITIONS UNDER WHICH SCIENTIFIC HANDWRITING IDENTIFICATION MAY LEAD TO AN ACCURATE FINDING AND UNDER WHICH A HANDWRITING EXPERT MAY BE ABLE TO RENDER AN ACCURATE OPINION. (d) NBI DOCUMENT EXAMINER ALBACEA WAS IN FACT TECHNICALLY HIRED BY RESPONDENT LAGON THROUGH HER ATTORNEY-IN-FACT, ARMANDO LAGON, BY THE DEFRAYAL OF HIS TRAVELLING, LODGING AND OTHER EXPENSES. II. RESPONDENT MARIA LAGON IS ESTOPPED FROM CONTESTING THE VALIDITY OF THE SPECIAL POWER OF ATTORNEY AND THE REAL ESTATE MORTGAGES, BECAUSE: (a) THROUGH THE PREVIOUS AUTHORITY (SPECIAL POWER OF ATTORNEY) TO DEFENDANT JAO BIO TONG TO DEAL WITH "HER" PROPERTIES, RESPONDENT MARIA LAGON HELD OUT SAID DEFENDANT JAO BIO TONG AS HER DULY AUTHORIZED ATTORNEY-IN-FACT. (b) THE PROCEEDS OF THE LOANS OBTAINED FROM PETITIONER CBC WERE USED TO PAY OFF THE MORTGAGE OBLIGATIONS OF RESPONDENT MARIA LAGON AND DEFENDANT JAO BIO TONG WITH OTHER BANKING INSTITUTION.6 Simply stated, two issues are for resolution now: (1) Are the special powers of attorney (SPAs) of Jao spurious, given the allegation of forgery? (2) Are the real estate mortgages executed by Jao valid? Both depend on the threshold issue of credibility of respondent's expert witness, Bienvenido Albacea vis--vis petitioner's expert witness, Desiderio A. Pagui. Primarily, what petitioner questions is the credibility of Albacea as an expert witness. As petitioner claims, which the trial court sustained, Atty. Pagui's testimony should be given more weight since the trial court was in a better position to examine real and testimonial evidence. Besides, according to petitioner the credibility of Atty. Pagui was never raised as an issue in respondent's appeal brief.

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Moreover, according to petitioner, respondent clothed Jao with apparent authority as her agent, hence, she cannot now be permitted to deny the authority of Jao to the prejudice of innocent third parties. In addition, petitioner points out that respondent is estopped from questioning the validity of the mortgages because the loans were used to pay the obligation of Maria Lagon with other banks. Respondent's representatives counter that Atty. Pagui was a biased witness because he was hired by petitioner as a practicing private document examiner. Significantly, they point out that respondent Maria was in the United States at the time the SPAs were allegedly signed before the notary public in Nueva Vizcaya. They conclude that the irregularity in the notarization shows that the SPAs were spurious and the respondent's signatures were forgeries. Respondent's representatives also add that contrary to the claim that Maria benefited from the loan, Maria's estate ended up more heavily burdened since only a small portion of the loan obtained by Jao were applied to Maria's obligations. Therefore, Maria's representatives should not be estopped from questioning the mortgages. To begin with, the issue of whether the SPAs are authentic is a question of fact, that may be reviewed by this Court only under exceptional circumstances7 like when, as in this case, the findings of facts of the Court of Appeals are at variance with those of the trial court.8 We have held in prior cases that generally, a notarized instrument is admissible in evidence without further proof of its due execution and is conclusive as to the truthfulness of its contents, 9 and has in its favor the presumption of regularity. 10 However, this presumption is not absolute and may be rebutted by clear and convincing evidence.11 In his testimony, Jao admitted that the SPAs were not signed in the presence of the notary public, but pre-signed by respondent in the United States. Likewise, respondent neither appeared personally before the notary public nor acknowledged to him that the instrument was her own free and voluntary act and deed, contrary to what appears in the SPAs' acknowledgement. Patently then, the notarization was irregular and could not be given probative value. As the respondent has repudiated the signatures in the SPAs and it was shown that she did not acknowledge these before the notary public, the burden of proof to show the SPAs' authenticity, genuineness and due execution lay with petitioner. In our view, petitioner failed in this task. The contrasting testimony of the experts on the authenticity of the signatures of Maria could not benefit either side, considering the admission that the notarial requisites had not been adhered to. Finally, with respect to the credibility of the handwriting expert, courts are not bound to give probative value or evidentiary value to the opinions of handwriting experts, as resort to handwriting experts is not mandatory.12 The courts may place whatever weight they choose upon such testimonies in accordance with the facts of the case.13 In this case, resort to handwriting experts would not benefit either of the parties, considering the conflicting testimonies of the expert witnesses and as earlier mentioned the fact that the notarial requirements had not been met. We are also not persuaded by petitioner's argument that respondent benefited from the loan. Assuming that indeed part of the loan was used to pay for Maria's own loan, still the incontrovertible fact remains that the SPAs were spurious and the mortgage unauthorized. Moreover, petitioner could not be considered a mortgagee in good faith. It had knowledge that respondent was in the United States at the time the SPAs were allegedly executed, yet, it did not question their due execution. Though petitioner is not expected to conduct an exhaustive investigation on the history of the mortgagor's title, it cannot be excused from the duty of exercising the due diligence required of a banking institution.14 Banks are expected to exercise more care and prudence than private individuals in their dealings, even those that involve registered lands, for their business is affected with public interest.15 WHEREFORE, the petition is DENIED. The Decisiondated August 21, 2003 and the Resolution dated November 14, 2003 of the Court of Appeals in CA-G.R. CV No. 60853 are hereby AFFIRMED. Costs against petitioner. SO ORDERED.
Carpio, Carpio-Morales, Tinga, Velasco, Jr., J.J., concur.

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THIRD DIVISION

G.R. No. 156132

February 6, 2007

CITIBANK, N.A. (Formerly First National City Bank) and INVESTORS FINANCE CORPORATION, doing business under the name and style of FNCB Finance, Petitioners, vs. MODESTA R. SABENIANO, Respondent.

RESOLUTION

CHICO-NAZARIO, J.:

On 16 October 2006, this Court promulgated its Decision1 in the above-entitled case, the dispositive portion of which reads IN VIEW OF THE FOREGOING, the instant Petition is PARTLY GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. No. 51930, dated 26 March 2002, as already modified by its Resolution, dated 20 November 2002, is hereby AFFIRMED WITH MODIFICATION, as follows 1. PNs No. 23356 and 23357 are DECLARED subsisting and outstanding. Petitioner Citibank is ORDERED to return to respondent the principal amounts of the said PNs, amounting to Three Hundred Eighteen Thousand Eight Hundred NinetySeven Pesos and Thirty-Four Centavos (P318,897.34) and Two Hundred Three Thousand One Hundred Fifty Pesos (P203,150.00), respectively, plus the stipulated interest of Fourteen and a half percent (14.5%) per annum, beginning 17 March 1977; 2. The remittance of One Hundred Forty-Nine Thousand Six Hundred Thirty Two US Dollars and Ninety-Nine Cents (US$149,632.99) from respondents Citibank-Geneva accounts to petitioner Citibank in Manila, and the application of the same against respondents outstanding loans with the latter, is DECLARED illegal, null and void. Petitioner Citibank is ORDERED to refund to respondent the said amount, or its equivalent in Philippine currency using the exchange rate at the time of payment, plus the stipulated interest for each of the fiduciary placements and current accounts involved, beginning 26 October 1979; 3. Petitioner Citibank is ORDERED to pay respondent moral damages in the amount of Three Hundred Thousand Pesos (P300,000.00); exemplary damages in the amount of Two Hundred Fifty Thousand Pesos (P250,000.00); and attorneys fees in the amount of Two Hundred Thousand Pesos (P200,000.00); and 4. Respondent is ORDERED to pay petitioner Citibank the balance of her outstanding loans, which, from the respective dates of their maturity to 5 September 1979, was computed to be in the sum of One Million Sixty-Nine Thousand Eight Hundred Forty-Seven Pesos and Forty Centavos (P1,069,847.40), inclusive of interest. These outstanding loans shall continue to earn interest, at the rates stipulated in the corresponding PNs, from 5 September 1979 until payment thereof. Subsequent thereto, respondent Modesta R. Sabeniano filed an Urgent Motion to Clarify and/or Confirm Decision with Notice of Judgment on 20 October 2006; while, petitioners Citibank, N.A. and FNCB Finance2 filed their Motion for Partial Reconsideration of the foregoing Decision on 6 November 2006. The facts of the case, as determined by this Court in its Decision, may be summarized as follows. Respondent was a client of petitioners. She had several deposits and market placements with petitioners, among which were her savings account with the local branch of petitioner Citibank (Citibank-Manila3 ); money market placements with petitioner FNCB Finance; and dollar accounts with the Geneva branch of petitioner Citibank (Citibank-Geneva). At the same time, respondent had outstanding loans with petitioner Citibank, incurred at Citibank-Manila, the principal amounts aggregating to P1,920,000.00, all of which had become due and demandable by May 1979. Despite repeated demands by petitioner Citibank, respondent failed to pay her outstanding loans. Thus, petitioner Citibank used respondents deposits and money market placements to off-set and liquidate her outstanding obligations, as follows P 2,156,940. 58 (1,022,916. 66) (31,079.14) (1,102,944. 78) P 0.00

Respondents outstanding obligation (principal and interest as of 26 October 1979) Les s: Proceeds from respondents money market placements with petitioner FNCB Finance (principal and interest as of 5 September 1979) Deposits in respondents bank accounts with petitioner Citibank Proceeds of respondents money market placements and dollar accounts with Citibank-Geneva (peso equivalent as of 26 October 1979) Balance of respondents obligation

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Respondent, however, denied having any outstanding loans with petitioner Citibank. She likewise denied that she was duly informed of the off-setting or compensation thereof made by petitioner Citibank using her deposits and money market placements with petitioners. Hence, respondent sought to recover her deposits and money market placements. Respondent instituted a complaint for "Accounting, Sum of Money and Damages" against petitioners, docketed as Civil Case No. 11336, before the Regional Trial Court (RTC) of Makati City. After trial proper, which lasted for a decade, the RTC rendered a Decision4 on 24 August 1995, the dispositive portion of which reads WHEREFORE, in view of all the foregoing, decision is hereby rendered as follows: (1) Declaring as illegal, null and void the setoff effected by the defendant Bank [petitioner Citibank] of plaintiffs [respondent Sabeniano] dollar deposit with Citibank, Switzerland, in the amount of US$149,632.99, and ordering the said defendant [petitioner Citibank] to refund the said amount to the plaintiff with legal interest at the rate of twelve percent (12%) per annum, compounded yearly, from 31 October 1979 until fully paid, or its peso equivalent at the time of payment; (2) Declaring the plaintiff [respondent Sabeniano] indebted to the defendant Bank [petitioner Citibank] in the amount of P1,069,847.40 as of 5 September 1979 and ordering the plaintiff [respondent Sabeniano] to pay said amount, however, there shall be no interest and penalty charges from the time the illegal setoff was effected on 31 October 1979; (3) Dismissing all other claims and counterclaims interposed by the parties against each other. Costs against the defendant Bank. All the parties appealed the afore-mentioned RTC Decision to the Court of Appeals, docketed as CA-G.R. CV No. 51930. On 26 March 2002, the appellate court promulgated its Decision,5 ruling entirely in favor of respondent, to wit Wherefore, premises considered, the assailed 24 August 1995 Decision of the court a quo is hereby AFFIRMED with MODIFICATION, as follows: 1. Declaring as illegal, null and void the set-off effected by the defendant-appellant Bank of the plaintiff-appellants dollar deposit with Citibank, Switzerland, in the amount of US$149,632.99, and ordering defendant-appellant Citibank to refund the said amount to the plaintiff-appellant with legal interest at the rate of twelve percent (12%) per annum, compounded yearly, from 31 October 1979 until fully paid, or its peso equivalent at the time of payment; 2. As defendant-appellant Citibank failed to establish by competent evidence the alleged indebtedness of plaintiff-appellant, the set-off of P1,069,847.40 in the account of Ms. Sabeniano is hereby declared as without legal and factual basis; 3. As defendants-appellants failed to account the following plaintiff-appellants money market placements, savings account and current accounts, the former is hereby ordered to return the same, in accordance with the terms and conditions agreed upon by the contending parties as evidenced by the certificates of investments, to wit: (i) Citibank NNPN Serial No. 023356 (Cancels and Supersedes NNPN No. 22526) issued on 17 March 1977, P318,897.34 with 14.50% interest p.a.; (ii) Citibank NNPN Serial No. 23357 (Cancels and Supersedes NNPN No. 22528) issued on 17 March 1977, P203,150.00 with 14.50 interest p.a.; (iii) FNCB NNPN Serial No. 05757 (Cancels and Supersedes NNPN No. 04952), issued on 02 June 1977, P500,000.00 with 17% interest p.a.; (iv) FNCB NNPN Serial No. 05758 (Cancels and Supersedes NNPN No. 04962), issued on 02 June 1977, P500,000.00 with 17% interest per annum; (v) The Two Million (P2,000,000.00) money market placements of Ms. Sabeniano with the Ayala Investment & Development Corporation (AIDC) with legal interest at the rate of twelve percent (12%) per annum compounded yearly, from 30 September 1976 until fully paid; 4. Ordering defendants-appellants to jointly and severally pay the plaintiff-appellant the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00) by way of moral damages, FIVE HUNDRED THOUSAND PESOS (P500,000.00) as exemplary damages, and ONE HUNDRED THOUSAND PESOS (P100,000.00) as attorneys fees. Acting on petitioners Motion for Partial Reconsideration, the Court of Appeals issued a Resolution,6 dated 20 November 2002, modifying its earlier Decision, thus WHEREFORE, premises considered, the instant Motion for Reconsideration is PARTIALLY GRANTED as Sub-paragraph (V) paragraph 3 of the assailed Decisions dispositive portion is hereby ordered DELETED.

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The challenged 26 March 2002 Decision of the Court is AFFIRMED with MODIFICATION. Since the Court of Appeals Decision, dated 26 March 2002, as modified by the Resolution of the same court, dated 20 November 2002, was still principally in favor of respondent, petitioners filed the instant Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court. After giving due course to the instant Petition, this Court promulgated on 16 October 2006 its Decision, now subject of petitioners Motion for Partial Reconsideration.1awphi1.net Among the numerous grounds raised by petitioners in their Motion for Partial Reconsideration, this Court shall address and discuss herein only particular points that had not been considered or discussed in its Decision. Even in consideration of these points though, this Court remains unconvinced that it should modify or reverse in any way its disposition of the case in its earlier Decision. As to the off-setting or compensation of respondents outstanding loan balance with her dollar deposits in Citibank-Geneva Petitioners take exception to the following findings made by this Court in its Decision, dated 16 October 2006, disallowing the offsetting or compensation of the balance of respondents outstanding loans using her dollar deposits in Citibank-Geneva Without the Declaration of Pledge, petitioner Citibank had no authority to demand the remittance of respondents dollar accounts with Citibank-Geneva and to apply them to her outstanding loans. It cannot effect legal compensation under Article 1278 of the Civil Code since, petitioner Citibank itself admitted that Citibank-Geneva is a distinct and separate entity. As for the dollar accounts, respondent was the creditor and Citibank-Geneva is the debtor; and as for the outstanding loans, petitioner Citibank was the creditor and respondent was the debtor. The parties in these transactions were evidently not the principal creditor of each other. Petitioners maintain that respondents Declaration of Pledge, by virtue of which she supposedly assigned her dollar accounts with Citibank-Geneva as security for her loans with petitioner Citibank, is authentic and, thus, valid and binding upon respondent. Alternatively, petitioners aver that even without said Declaration of Pledge, the off-setting or compensation made by petitioner Citibank using respondents dollar accounts with Citibank-Geneva to liquidate the balance of her outstanding loans with CitibankManila was expressly authorized by respondent herself in the promissory notes (PNs) she signed for her loans, as well as sanctioned by Articles 1278 to 1290 of the Civil Code. This alternative argument is anchored on the premise that all branches of petitioner Citibank in the Philippines and abroad are part of a single worldwide corporate entity and share the same juridical personality. In connection therewith, petitioners deny that they ever admitted that Citibank-Manila and Citibank-Geneva are distinct and separate entities. Petitioners call the attention of this Court to the following provision found in all of the PNs7 executed by respondent for her loans At or after the maturity of this note, or when same becomes due under any of the provisions hereof, any money, stocks, bonds, or other property of any kind whatsoever, on deposit or otherwise, to the credit of the undersigned on the books of CITIBANK, N.A. in transit or in their possession, may without notice be applied at the discretion of the said bank to the full or partial payment of this note. It is the petitioners contention that the term "Citibank, N.A." used therein should be deemed to refer to all branches of petitioner Citibank in the Philippines and abroad; thus, giving petitioner Citibank the authority to apply as payment for the PNs even respondents dollar accounts with Citibank-Geneva. Still proceeding from the premise that all branches of petitioner Citibank should be considered as a single entity, then it should not matter that the respondent obtained the loans from Citibank-Manila and her deposits were with Citibank-Geneva. Respondent should be considered the debtor (for the loans) and creditor (for her deposits) of the same entity, petitioner Citibank. Since petitioner Citibank and respondent were principal creditors of each other, in compliance with the requirements under Article 1279 of the Civil Code,8 then the former could have very well used off-setting or compensation to extinguish the parties obligations to one another. And even without the PNs, off-setting or compensation was still authorized because according to Article 1286 of the Civil Code, "Compensation takes place by operation of law, even though the debts may be payable at different places, but there shall be an indemnity for expenses of exchange or transportation to the place of payment." Pertinent provisions of Republic Act No. 8791, otherwise known as the General Banking Law of 2000, governing bank branches are reproduced below SEC. 20. Bank Branches. Universal or commercial banks may open branches or other offices within or outside the Philippines upon prior approval of the Bangko Sentral. Branching by all other banks shall be governed by pertinent laws. A bank may, subject to prior approval of the Monetary Board, use any or all of its branches as outlets for the presentation and/or sale of the financial products of its allied undertaking or its investment house units. A bank authorized to establish branches or other offices shall be responsible for all business conducted in such branches and offices to the same extent and in the same manner as though such business had all been conducted in the head office. A bank and its branches and offices shall be treated as one unit. xxxx

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SEC. 72. Transacting Business in the Philippines. The entry of foreign banks in the Philippines through the establishment of branches shall be governed by the provisions of the Foreign Banks Liberalization Act. The conduct of offshore banking business in the Philippines shall be governed by the provisions of Presidential Decree No. 1034, otherwise known as the "Offshore Banking System Decree." xxxx SEC. 74. Local Branches of Foreign Banks. In case of a foreign bank which has more than one (1) branch in the Philippines, all such branches shall be treated as one (1) unit for the purpose of this Act, and all references to the Philippine branches of foreign banks shall be held to refer to such units. SEC. 75. Head Office Guarantee. In order to provide effective protection of the interests of the depositors and other creditors of Philippine branches of a foreign bank, the head office of such branches shall fully guarantee the prompt payment of all liabilities of its Philippine branch. Residents and citizens of the Philippines who are creditors of a branch in the Philippines of a foreign bank shall have preferential rights to the assets of such branch in accordance with existing laws. Republic Act No. 7721, otherwise known as the Foreign Banks Liberalization Law, lays down the policies and regulations specifically concerning the establishment and operation of local branches of foreign banks. Relevant provisions of the said statute read Sec. 2. Modes of Entry. - The Monetary Board may authorize foreign banks to operate in the Philippine banking system through any of the following modes of entry: (i) by acquiring, purchasing or owning up to sixty percent (60%) of the voting stock of an existing bank; (ii) by investing in up to sixty percent (60%) of the voting stock of a new banking subsidiary incorporated under the laws of the Philippines; or (iii) by establishing branches with full banking authority: Provided, That a foreign bank may avail itself of only one (1) mode of entry: Provided, further, That a foreign bank or a Philippine corporation may own up to a sixty percent (60%) of the voting stock of only one (1) domestic bank or new banking subsidiary. Sec. 5. Head Office Guarantee. - The head office of foreign bank branches shall guarantee prompt payment of all liabilities of its Philippine branches. It is true that the afore-quoted Section 20 of the General Banking Law of 2000 expressly states that the bank and its branches shall be treated as one unit. It should be pointed out, however, that the said provision applies to a universal9 or commercial bank,10 duly established and organized as a Philippine corporation in accordance with Section 8 of the same statute,11 and authorized to establish branches within or outside the Philippines. The General Banking Law of 2000, however, does not make the same categorical statement as regards to foreign banks and their branches in the Philippines. What Section 74 of the said law provides is that in case of a foreign bank with several branches in the country, all such branches shall be treated as one unit. As to the relations between the local branches of a foreign bank and its head office, Section 75 of the General Banking Law of 2000 and Section 5 of the Foreign Banks Liberalization Law provide for a "Home Office Guarantee," in which the head office of the foreign bank shall guarantee prompt payment of all liabilities of its Philippine branches. While the Home Office Guarantee is in accord with the principle that these local branches, together with its head office, constitute but one legal entity, it does not necessarily support the view that said principle is true and applicable in all circumstances. The Home Office Guarantee is included in Philippine statutes clearly for the protection of the interests of the depositors and other creditors of the local branches of a foreign bank.12 Since the head office of the bank is located in another country or state, such a guarantee is necessary so as to bring the head office within Philippine jurisdiction, and to hold the same answerable for the liabilities of its Philippine branches. Hence, the principle of the singular identity of that the local branches and the head office of a foreign bank are more often invoked by the clients in order to establish the accountability of the head office for the liabilities of its local branches. It is under such attendant circumstances in which the American authorities and jurisprudence presented by petitioners in their Motion for Partial Reconsideration were rendered. Now the question that remains to be answered is whether the foreign bank can use the principle for a reverse purpose, in order to extend the liability of a client to the foreign banks Philippine branch to its head office, as well as to its branches in other countries. Thus, if a client obtains a loan from the foreign banks Philippine branch, does it absolutely and automatically make the client a debtor, not just of the Philippine branch, but also of the head office and all other branches of the foreign bank around the world? This Court rules in the negative. There being a dearth of Philippine authorities and jurisprudence on the matter, this Court, just as what petitioners have done, turns to American authorities and jurisprudence. American authorities and jurisprudence are significant herein considering that the head office of petitioner Citibank is located in New York, United States of America (U.S.A.). Unlike Philippine statutes, the American legislation explicitly defines the relations among foreign branches of an American bank. Section 25 of the United States Federal Reserve Act13 states that Every national banking association operating foreign branches shall conduct the accounts of each foreign branch independently of the accounts of other foreign branches established by it and of its home office, and shall at the end of each fiscal period transfer to its general ledger the profit or loss accrued at each branch as a separate item.

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Contrary to petitioners assertion that the accounts of Citibank-Manila and Citibank-Geneva should be deemed as a single account under its head office, the foregoing provision mandates that the accounts of foreign branches of an American bank shall be conducted independently of each other. Since the head office of petitioner Citibank is in the U.S.A., then it is bound to treat its foreign branches in accordance with the said provision. It is only at the end of its fiscal period that the bank is required to transfer to its general ledger the profit or loss accrued at each branch, but still reporting it as a separate item. It is by virtue of this provision that the Circuit Court of Appeals of New York declared in Pan-American Bank and Trust Co. v. National City Bank of New York14 that a branch is not merely a tellers window; it is a separate business entity. The circumstances in the case of McGrath v. Agency of Chartered Bank of India, Australia & China15 are closest to the one at bar. In said case, the Chartered Bank had branches in several countries, including one in Hamburg, Germany and another in New York, U.S.A., and yet another in London, United Kingdom. The New York branch entered in its books credit in favor of four German firms. Said credit represents collections made from bills of exchange delivered by the four German firms. The same four German firms subsequently became indebted to the Hamburg branch. The London branch then requested for the transfer of the credit in the name of the German firms from the New York branch so as to be applied or setoff against the indebtedness of the same firms to the Hamburg branch. One of the question brought before the U.S. District Court of New York was "whether or not the debts and the alleged setoffs thereto are mutual," which could be answered by determining first whether the New York and Hamburg branches of Chartered Bank are individual business entities or are one and the same entity. In denying the right of the Hamburg branch to setoff, the U.S. District Court ratiocinated that The structure of international banking houses such as Chartered bank defies one rigorous description. Suffice it to say for present analysis, branches or agencies of an international bank have been held to be independent entities for a variety of purposes (a) deposits payable only at branch where made; Mutaugh v. Yokohama Specie Bank, Ltd., 1933, 149 Misc. 693, 269 N.Y.S. 65; Bluebird Undergarment Corp. v. Gomez, 1931, 139 Misc. 742, 249 N.Y.S. 319; (b) checks need be honored only when drawn on branch where deposited; Chrzanowska v. Corn Exchange Bank, 1916, 173 App. Div. 285, 159 N.Y.S. 385, affirmed 1919, 225 N.Y. 728, 122 N.E. 877; subpoena duces tecum on foreign banks record barred; In re Harris, D.C.S.D.N.Y. 1939, 27 F. Supp. 480; (d) a foreign branch separate for collection of forwarded paper; Pan-American Bank and Trust Company v. National City Bank of New York, 2 Cir., 1925, 6 F. 2d 762, certiorari denied 1925, 269 U.S. 554, 46 S. Ct. 18, 70 L. Ed. 408. Thus in law there is nothing innately unitary about the organization of international banking institutions. Defendant, upon its oral argument and in its brief, relies heavily on Sokoloff v. National City Bank of New York, 1928, 250 N.Y. 69, 164 N.E. 745, as authority for the proposition that Chartered Bank, not the Hamburg or New York Agency, is ultimately responsible for the amounts owing its German customers and, conversely, it is to Chartered Bank that the German firms owe their obligations. The Sokoloff case, aside from its violently different fact situation, is centered on the legal problem of default of payment and consequent breach of contract by a branch bank. It does not stand for the principle that in every instance an international bank with branches is but one legal entity for all purposes. The defendant concedes in its brief (p. 15) that there are purposes for which the various agencies and branches of Chartered Bank may be treated in law as separate entities. I fail to see the applicability of Sokoloff either as a guide to or authority for the resolution of this problem. The facts before me and the cases catalogued supra lend weight to the view that we are dealing here with Agencies independent of one another. xxxx I hold that for instant purposes the Hamburg Agency and defendant were independent business entities, and the attempted setoff may not be utilized by defendant against its debt to the German firms obligated to the Hamburg Agency. Going back to the instant Petition, although this Court concedes that all the Philippine branches of petitioner Citibank should be treated as one unit with its head office, it cannot be persuaded to declare that these Philippine branches are likewise a single unit with the Geneva branch. It would be stretching the principle way beyond its intended purpose. Therefore, this Court maintains its original position in the Decision that the off-setting or compensation of respondents loans with Citibank-Manila using her dollar accounts with Citibank-Geneva cannot be effected. The parties cannot be considered principal creditor of the other. As for the dollar accounts, respondent was the creditor and Citibank-Geneva was the debtor; and as for the outstanding loans, petitioner Citibank, particularly Citibank-Manila, was the creditor and respondent was the debtor. Since legal compensation was not possible, petitioner Citibank could only use respondents dollar accounts with Citibank-Geneva to liquidate her loans if she had expressly authorized it to do so by contract. Respondent cannot be deemed to have authorized the use of her dollar deposits with Citibank-Geneva to liquidate her loans with petitioner Citibank when she signed the PNs16 for her loans which all contained the provision that At or after the maturity of this note, or when same becomes due under any of the provisions hereof, any money, stocks, bonds, or other property of any kind whatsoever, on deposit or otherwise, to the credit of the undersigned on the books of CITIBANK, N.A. in transit or in their possession, may without notice be applied at the discretion of the said bank to the full or partial payment of this note. As has been established in the preceding discussion, "Citibank, N.A." can only refer to the local branches of petitioner Citibank together with its head office. Unless there is any showing that respondent understood and expressly agreed to a more far-reaching interpretation, the reference to Citibank, N.A. cannot be extended to all other branches of petitioner Citibank all over the world. Although theoretically, books of the branches form part of the books of the head office, operationally and practically, each branch maintains its own books which shall only be later integrated and balanced with the books of the head office. Thus, it is very possible to identify and segregate the books of the Philippine branches of petitioner Citibank from those of Citibank-Geneva, and to limit the authority granted for application as payment of the PNs to respondents deposits in the books of the former.

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Moreover, the PNs can be considered a contract of adhesion, the PNs being in standard printed form prepared by petitioner Citibank. Generally, stipulations in a contract come about after deliberate drafting by the parties thereto, there are certain contracts almost all the provisions of which have been drafted only by one party, usually a corporation. Such contracts are called contracts of adhesion, because the only participation of the party is the affixing of his signature or his "adhesion" thereto. This being the case, the terms of such contract are to be construed strictly against the party which prepared it.17 As for the supposed Declaration of Pledge of respondents dollar accounts with Citibank-Geneva as security for the loans, this Court stands firm on its ruling that the non-production thereof is fatal to petitioners cause in light of respondents claim that her signature on such document was a forgery. It bears to note that the original of the Declaration of Pledge is with Citibank-Geneva, a branch of petitioner Citibank. As between respondent and petitioner Citibank, the latter has better access to the document. The constant excuse forwarded by petitioner Citibank that Citibank-Geneva refused to return possession of the original Declaration of Pledge to Citibank-Manila only supports this Courts finding in the preceding paragraphs that the two branches are actually operating separately and independently of each other. Further, petitioners keep playing up the fact that respondent, at the beginning of the trial, refused to give her specimen signatures to help establish whether her signature on the Declaration of Pledge was indeed forged. Petitioners seem to forget that subsequently, respondent, on advice of her new counsel, already offered to cooperate in whatever manner so as to bring the original Declaration of Pledge before the RTC for inspection. The exchange of the counsels for the opposing sides during the hearing on 24 July 1991 before the RTC reveals the apparent willingness of respondents counsel to undertake whatever course of action necessary for the production of the contested document, and the evasive, non-committal, and uncooperative attitude of petitioners counsel.18 Lastly, this Courts ruling striking down the Declaration of Pledge is not entirely based on respondents allegation of forgery. In its Decision, this Court already extensively discussed why it found the said Declaration of Pledge highly suspicious and irregular, to wit First of all, it escapes this Court why petitioner Citibank took care to have the Deeds of Assignment of the PNs notarized, yet left the Declaration of Pledge unnotarized. This Court would think that petitioner Citibank would take greater cautionary measures with the preparation and execution of the Declaration of Pledge because it involved respondents "all present and future fiduciary placements" with a Citibank branch in another country, specifically, in Geneva, Switzerland. While there is no express legal requirement that the Declaration of Pledge had to be notarized to be effective, even so, it could not enjoy the same prima facie presumption of due execution that is extended to notarized documents, and petitioner Citibank must discharge the burden of proving due execution and authenticity of the Declaration of Pledge. Second, petitioner Citibank was unable to establish the date when the Declaration of Pledge was actually executed. The photocopy of the Declaration of Pledge submitted by petitioner Citibank before the RTC was undated. It presented only a photocopy of the pledge because it already forwarded the original copy thereof to Citibank-Geneva when it requested for the remittance of respondents dollar accounts pursuant thereto. Respondent, on the other hand, was able to secure a copy of the Declaration of Pledge, certified by an officer of Citibank-Geneva, which bore the date 24 September 1979. Respondent, however, presented her passport and plane tickets to prove that she was out of the country on the said date and could not have signed the pledge. Petitioner Citibank insisted that the pledge was signed before 24 September 1979, but could not provide an explanation as to how and why the said date was written on the pledge. Although Mr. Tan testified that the Declaration of Pledge was signed by respondent personally before him, he could not give the exact date when the said signing took place. It is important to note that the copy of the Declaration of Pledge submitted by the respondent to the RTC was certified by an officer of Citibank-Geneva, which had possession of the original copy of the pledge. It is dated 24 September 1979, and this Court shall abide by the presumption that the written document is truly dated. Since it is undeniable that respondent was out of the country on 24 September 1979, then she could not have executed the pledge on the said date. Third, the Declaration of Pledge was irregularly filled-out. The pledge was in a standard printed form. It was constituted in favor of Citibank, N.A., otherwise referred to therein as the Bank. It should be noted, however, that in the space which should have named the pledgor, the name of petitioner Citibank was typewritten, to wit The pledge right herewith constituted shall secure all claims which the Bank now has or in the future acquires against Citibank, N.A., Manila (full name and address of the Debtor), regardless of the legal cause or the transaction (for example current account, securities transactions, collections, credits, payments, documentary credits and collections) which gives rise thereto, and including principal, all contractual and penalty interest, commissions, charges, and costs. The pledge, therefore, made no sense, the pledgor and pledgee being the same entity. Was a mistake made by whoever filled-out the form? Yes, it could be a possibility. Nonetheless, considering the value of such a document, the mistake as to a significant detail in the pledge could only be committed with gross carelessness on the part of petitioner Citibank, and raised serious doubts as to the authenticity and due execution of the same. The Declaration of Pledge had passed through the hands of several bank officers in the country and abroad, yet, surprisingly and implausibly, no one noticed such a glaring mistake. Lastly, respondent denied that it was her signature on the Declaration of Pledge. She claimed that the signature was a forgery. When a document is assailed on the basis of forgery, the best evidence rule applies Basic is the rule of evidence that when the subject of inquiry is the contents of a document, no evidence is admissible other than the original document itself except in the instances mentioned in Section 3, Rule 130 of the Revised Rules of Court. Mere photocopies of documents are inadmissible pursuant to the best evidence rule. This is especially true when the issue is that of forgery. As a rule, forgery cannot be presumed and must be proved by clear, positive and convincing evidence and the burden of proof lies on the party alleging forgery. The best evidence of a forged signature in an instrument is the instrument itself reflecting the alleged forged signature. The fact of forgery can only be established by a comparison between the alleged forged signature and the authentic

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and genuine signature of the person whose signature is theorized upon to have been forged. Without the original document containing the alleged forged signature, one cannot make a definitive comparison which would establish forgery. A comparison based on a mere xerox copy or reproduction of the document under controversy cannot produce reliable results. Respondent made several attempts to have the original copy of the pledge produced before the RTC so as to have it examined by experts. Yet, despite several Orders by the RTC, petitioner Citibank failed to comply with the production of the original Declaration of Pledge. It is admitted that Citibank-Geneva had possession of the original copy of the pledge. While petitioner Citibank in Manila and its branch in Geneva may be separate and distinct entities, they are still incontestably related, and between petitioner Citibank and respondent, the former had more influence and resources to convince Citibank-Geneva to return, albeit temporarily, the original Declaration of Pledge. Petitioner Citibank did not present any evidence to convince this Court that it had exerted diligent efforts to secure the original copy of the pledge, nor did it proffer the reason why Citibank-Geneva obstinately refused to give it back, when such document would have been very vital to the case of petitioner Citibank. There is thus no justification to allow the presentation of a mere photocopy of the Declaration of Pledge in lieu of the original, and the photocopy of the pledge presented by petitioner Citibank has nil probative value. In addition, even if this Court cannot make a categorical finding that respondents signature on the original copy of the pledge was forged, it is persuaded that petitioner Citibank willfully suppressed the presentation of the original document, and takes into consideration the presumption that the evidence willfully suppressed would be adverse to petitioner Citibank if produced. As far as the Declaration of Pledge is concerned, petitioners failed to submit any new evidence or argument that was not already considered by this Court when it rendered its Decision. As to the value of the dollar deposits in Citibank-Geneva ordered refunded to respondent In case petitioners are still ordered to refund to respondent the amount of her dollar accounts with Citibank-Geneva, petitioners beseech this Court to adjust the nominal values of respondents dollar accounts and/or her overdue peso loans by using the values of the currencies stipulated at the time the obligations were established in 1979, to address the alleged inequitable consequences resulting from the extreme and extraordinary devaluation of the Philippine currency that occurred in the course of the Asian crisis of 1997. Petitioners base their request on Article 1250 of the Civil Code which reads, "In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary." It is well-settled that Article 1250 of the Civil Code becomes applicable only when there is extraordinary inflation or deflation of the currency. Inflation has been defined as the sharp increase of money or credit or both without a corresponding increase in business transaction. There is inflation when there is an increase in the volume of money and credit relative to available goods resulting in a substantial and continuing rise in the general price level.19 In Singson v. Caltex (Philippines), Inc.,20 this Court already provided a discourse as to what constitutes as extraordinary inflation or deflation of currency, thus We have held extraordinary inflation to exist when there is a decrease or increase in the purchasing power of the Philippine currency which is unusual or beyond the common fluctuation in the value of said currency, and such increase or decrease could not have been reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation. An example of extraordinary inflation, as cited by the Court in Filipino Pipe and Foundry Corporation vs. NAWASA, supra, is that which happened to the deutschmark in 1920. Thus: "More recently, in the 1920s, Germany experienced a case of hyperinflation. In early 1921, the value of the German mark was 4.2 to the U.S. dollar. By May of the same year, it had stumbled to 62 to the U.S. dollar. And as prices went up rapidly, so that by October 1923, it had reached 4.2 trillion to the U.S. dollar!" (Bernardo M. Villegas & Victor R. Abola, Economics, An Introduction [Third Edition]). As reported, "prices were going up every week, then every day, then every hour. Women were paid several times a day so that they could rush out and exchange their money for something of value before what little purchasing power was left dissolved in their hands. Some workers tried to beat the constantly rising prices by throwing their money out of the windows to their waiting wives, who would rush to unload the nearly worthless paper. A postage stamp cost millions of marks and a loaf of bread, billions." (Sidney Rutberg, "The Money Balloon", New York: Simon and Schuster, 1975, p. 19, cited in "Economics, An Introduction" by Villegas & Abola, 3rd ed.) The supervening of extraordinary inflation is never assumed. The party alleging it must lay down the factual basis for the application of Article 1250. Thus, in the Filipino Pipe case, the Court acknowledged that the voluminous records and statistics submitted by plaintiff-appellant proved that there has been a decline in the purchasing power of the Philippine peso, but this downward fall cannot be considered "extraordinary" but was simply a universal trend that has not spared our country. Similarly, in Huibonhoa vs. Court of Appeals, the Court dismissed plaintiff-appellant's unsubstantiated allegation that the Aquino assassination in 1983 caused building and construction costs to double during the period July 1983 to February 1984. In Serra vs. Court of Appeals, the Court again did not consider the decline in the peso's purchasing power from 1983 to 1985 to be so great as to result in an extraordinary inflation. Like the Serra and Huibonhoa cases, the instant case also raises as basis for the application of Article 1250 the Philippine economic crisis in the early 1980s --- when, based on petitioner's evidence, the inflation rate rose to 50.34% in 1984. We hold that there is no legal or factual basis to support petitioner's allegation of the existence of extraordinary inflation during this period, or, for that matter, the entire time frame of 1968 to 1983, to merit the adjustment of the rentals in the lease contract dated July 16, 1968.

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Although by petitioner's evidence there was a decided decline in the purchasing power of the Philippine peso throughout this period, we are hard put to treat this as an "extraordinary inflation" within the meaning and intent of Article 1250. Rather, we adopt with approval the following observations of the Court of Appeals on petitioner's evidence, especially the NEDA certification of inflation rates based on consumer price index: xxx (a) from the period 1966 to 1986, the official inflation rate never exceeded 100% in any single year; (b) the highest official inflation rate recorded was in 1984 which reached only 50.34%; (c) over a twenty one (21) year period, the Philippines experienced a single-digit inflation in ten (10) years (i.e., 1966, 1967, 1968, 1969, 1975, 1976, 1977, 1978, 1983 and 1986); (d) in other years (i.e., 1970, 1971, 1972, 1973, 1974, 1979, 1980, 1981, 1982, 1984 and 1989) when the Philippines experienced double-digit inflation rates, the average of those rates was only 20.88%; (e) while there was a decline in the purchasing power of the Philippine currency from the period 1966 to 1986, such cannot be considered as extraordinary; rather, it is a normal erosion of the value of the Philippine peso which is a characteristic of most currencies. "Erosion" is indeed an accurate description of the trend of decline in the value of the peso in the past three to four decades. Unfortunate as this trend may be, it is certainly distinct from the phenomenon contemplated by Article 1250. Moreover, this Court has held that the effects of extraordinary inflation are not to be applied without an official declaration thereof by competent authorities. The burden of proving that there had been extraordinary inflation or deflation of the currency is upon the party that alleges it. Such circumstance must be proven by competent evidence, and it cannot be merely assumed. In this case, petitioners presented no proof as to how much, for instance, the price index of goods and services had risen during the intervening period.21 All the information petitioners provided was the drop of the U.S. dollar-Philippine peso exchange rate by 17 points from June 1997 to January 1998. While the said figure was based on the statistics of the Bangko Sentral ng Pilipinas (BSP), it is also significant to note that the BSP did not categorically declare that the same constitute as an extraordinary inflation. The existence of extraordinary inflation must be officially proclaimed by competent authorities, and the only competent authority so far recognized by this Court to make such an official proclamation is the BSP.22 Neither can this Court, by merely taking judicial notice of the Asian currency crisis in 1997, already declare that there had been extraordinary inflation. It should be recalled that the Philippines likewise experienced economic crisis in the 1980s, yet this Court did not find that extraordinary inflation took place during the said period so as to warrant the application of Article 1250 of the Civil Code. Furthermore, it is incontrovertible that Article 1250 of the Civil Code is based on equitable considerations. Among the maxims of equity are (1) he who seeks equity must do equity, and (2) he who comes into equity must come with clean hands. The latter is a frequently stated maxim which is also expressed in the principle that he who has done inequity shall not have equity.23 Petitioner Citibank, hence, cannot invoke Article 1250 of the Civil Code because it does not come to court with clean hands. The delay in the recovery24 by respondent of her dollar accounts with Citibank-Geneva was due to the unlawful act of petitioner Citibank in using the same to liquidate respondents loans. Petitioner Citibank even attempted to justify the off-setting or compensation of respondents loans using her dollar accounts with Citibank-Geneva by the presentation of a highly suspicious and irregular, and even possibly forged, Declaration of Pledge. The damage caused to respondent of the deprivation of her dollar accounts for more than two decades is unquestionably relatively more extensive and devastating, as compared to whatever damage petitioner Citibank, an international banking corporation with undoubtedly substantial capital, may have suffered for respondents non-payment of her loans. It must also be remembered that petitioner Citibank had already considered respondents loans paid or liquidated by 26 October 1979 after it had fully effected compensation thereof using respondents deposits and money market placements. All this time, respondents dollar accounts are unlawfully in the possession of and are being used by petitioner Citibank for its business transactions. In the meantime, respondents businesses failed and her properties were foreclosed because she was denied access to her funds when she needed them most. Taking these into consideration, respondents dollar accounts with Citibank-Geneva must be deemed to be subsisting and continuously deposited with petitioner Citibank all this while, and will only be presently withdrawn by respondent. Therefore, petitioner Citibank should refund to respondent the U.S. $149,632.99 taken from her Citibank-Geneva accounts, or its equivalent in Philippine currency using the exchange rate at the time of payment, plus the stipulated interest for each of the fiduciary placements and current accounts involved, beginning 26 October 1979. As to respondents Motion to Clarify and/or Confirm Decision with Notice of Judgment Respondent, in her Motion, is of the mistaken notion that the Court of Appeals Decision, dated 26 March 2002, as modified by the Resolution of the same court, dated 20 November 2002, would be implemented or executed together with this Courts Decision. This Court clarifies that its affirmation of the Decision of the Court of Appeals, as modified, is only to the extent that it recognizes that petitioners had liabilities to the respondent. However, this Courts Decision modified that of the appellate courts by making its own determination of the specific liabilities of the petitioners to respondent and the amounts thereof; as well as by recognizing that respondent also had liabilities to petitioner Citibank and the amount thereof. Thus, for purposes of execution, the parties need only refer to the dispositive portion of this Courts Decision, dated 16 October 2006, should it already become final and executory, without any further modifications. As the last point, there is no merit in respondents Motion for this Court to already declare its Decision, dated 16 October 2006, final and executory. A judgment becomes final and executory by operation of law and, accordingly, the finality of the judgment becomes a

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fact upon the lapse of the reglementary period without an appeal or a motion for new trial or reconsideration being filed. 25 This Court cannot arbitrarily disregard the reglementary period and declare a judgment final and executory upon the mere motion of one party, for to do so will be a culpable violation of the right of the other parties to due process. IN VIEW OF THE FOREGOING, petitioners Motion for Partial Reconsideration of this Courts Decision, dated 16 October 2006, and respondents Motion for this Court to declare the same Decision already final and executory, are both DENIED for lack of merit. SO ORDERED.
MINITA V. CHICO-NAZARIO Associate Justice

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FIRST DIVISION

G.R. No. 150886

February 16, 2007

RURAL BANK OF SAN MIGUEL, INC. and HILARIO P. SORIANO, in his capacity as majority stockholder in the Rural Bankof San Miguel, Inc., Petitioners, vs. MONETARY BOARD, BANGKO SENTRAL NG PILIPINAS and PHILIPPINE DEPOSIT INSURANCE CORPORATION, Respondents.

DECISION

CORONA, J.:

This is a petition for review on certiorari1 of a decision2 and resolution3 of the Court of Appeals (CA) dated March 28, 2000 and November 13, 2001, respectively, in CA-G.R. SP No. 57112. Petitioner Rural Bank of San Miguel, Inc. (RBSM) was a domestic corporation engaged in banking. It started operations in 1962 and by year 2000 had 15 branches in Bulacan.4 Petitioner Hilario P. Soriano claims to be the majority stockholder of its outstanding shares of stock.5 On January 21, 2000, respondent Monetary Board (MB), the governing board of respondent Bangko Sentral ng Pilipinas (BSP), issued Resolution No. 105 prohibiting RBSM from doing business in the Philippines, placing it under receivership and designating respondent Philippine Deposit Insurance Corporation (PDIC) as receiver: On the basis of the comptrollership/monitoring report as of October 31, 1999 as reported by Mr. Wilfredo B. Domo-ong, Director, Department of Rural Banks, in his memorandum dated January 20, 2000, which report showed that [RBSM] (a) is unable to pay its liabilities as they become due in the ordinary course of business; (b) cannot continue in business without involving probable losses to its depositors and creditors; that the management of the bank had been accordingly informed of the need to infuse additional capital to place the bank in a solvent financial condition and was given adequate time within which to make the required infusion and that no infusion of adequate fresh capital was made, the Board decided as follows: 1. To prohibit the bank from doing business in the Philippines and to place its assets and affairs under receivership in accordance with Section 30 of [RA 7653]; 2. To designate the [PDIC] as receiver of the bank; xxx xxx xxx6 On January 31, 2000, petitioners filed a petition for certiorari and prohibition in the Regional Trial Court (RTC) of Malolos, Branch 22 to nullify and set aside Resolution No. 105.7 However, on February 7, 2000, petitioners filed a notice of withdrawal in the RTC and, on the same day, filed a special civil action for certiorari and prohibition in the CA. On February 8, 2000, the RTC dismissed the case pursuant to Section 1, Rule 17 of the Rules of Court.8 The CAs findings of facts were as follows. To assist its impaired liquidity and operations, the RBSM was granted emergency loans on different occasions in the aggregate amount of P375 [million]. As early as November 18, 1998, Land Bank of the Philippines (LBP) advised RBSM that it will terminate the clearing of RBSMs checks in view of the latters frequent clearing losses and continuing failure to replenish its Special Clearing Demand Deposit with LBP. The BSP interceded with LBP not to terminate the clearing arrangement of RBSM to protect the interests of RBSMs depositors and creditors. After a year, or on November 29, 1999, the LBP informed the BSP of the termination of the clearing facility of RBSM to take effect on December 29, 1999, in view of the clearing problems of RBSM. On December 28, 1999, the MB approved the release of P26.189 [million] which is the last tranche of the P375 million emergency loan for the sole purpose of servicing and meeting the withdrawals of its depositors. Of the P26.180 million, xxx P12.6 million xxx was not used to service withdrawals [and] remains unaccounted for as admitted by [RBSMs Treasury Officer and Officer-in-Charge of Treasury]. Instead of servicing withdrawals of depositors, RBSM paid Forcecollect Professional Solution, Inc. and Surecollect Professional, Inc., entities which are owned and controlled by Hilario P. Soriano and other RBSM officers. On January 4, 2000, RBSM declared a bank holiday. RBSM and all of its 15 branches were closed from doing business. Alarmed and disturbed by the unilateral declaration of bank holiday, [BSP] wanted to examine the books and records of RBSM but encountered problems.

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Meanwhile, on November 10, 1999, RBSMs designated comptroller, Ms. Zenaida Cabais of the BSP, submitted to the Department of Rural Banks, BSP, a Comptrollership Report on her findings on the financial condition and operations of the bank as of October 31, 1999. Another set of findings was submitted by said comptroller [and] this second report reflected the financial status of RBSM as of December 31, 1999. The findings of the comptroller on the financial state of RBSM as of October 31, 1999 in comparison with the financial condition as of December 31, 1999 is summed up pertinently as follows: FINANCIAL CONDITION OF RBSM As of Oct. 31, 1999 Total obligations/ Liabilities Realizable Assets Deficit Cash on Hand P1,076,863,00 0.00 898,588,000.0 0 178,275,000.0 0 101,441.547.0 0 As of Dec. 31, 1999 1,009,898,000. 00

796,930,000.00 212,968,000.00 8,266,450.00

Required Capital Infusion P252,120,000.00 Capital Infusion P5,000,000.00 (On Dec. 20, 1999) Actual Breakdown of Total Obligations: 1) Deposits of 20,000 depositors P578,201,000.00 2) Borrowings from BSP P320,907,000.00 3) Unremitted withholding and gross receipt taxes P57,403,000.00.9 Based on these comptrollership reports, the director of the Department of Rural Banks Supervision and Examination Sector, Wilfredo B. Domo-ong, made a report to the MB dated January 20, 2000.10 The MB, after evaluating and deliberating on the findings and recommendation of the Department of Rural Banks Supervision and Examination Sector, issued Resolution No. 105 on January 21, 2000.11 Thereafter, PDIC implemented the closure order and took over the management of RBSMs assets and affairs. In their petition12 before the CA, petitioners claimed that respondents MB and BSP committed grave abuse of discretion in issuing Resolution No. 105. The petition was dismissed by the CA on March 28, 2000. It held, among others, that the decision of the MB to issue Resolution No. 105 was based on the findings and recommendations of the Department of Rural Banks Supervision and Examination Sector, the comptroller reports as of October 31, 1999 and December 31, 1999 and the declaration of a bank holiday. Such could be considered as substantial evidence.13 Pertinently, on June 9, 2000, on the basis of reports prepared by PDIC stating that RBSM could not resume business with sufficient assurance of protecting the interest of its depositors, creditors and the general public, the MB passed Resolution No. 966 directing PDIC to proceed with the liquidation of RBSM under Section 30 of RA 7653.14 Hence this petition. It is well-settled that the closure of a bank may be considered as an exercise of police power.15 The action of the MB on this matter is final and executory.16 Such exercise may nonetheless be subject to judicial inquiry and can be set aside if found to be in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction.17 Petitioners argue that Resolution No. 105 was bereft of any basis considering that no complete examination had been conducted before it was issued. This case essentially boils down to one core issue: whether Section 30 of RA 7653 (also known as the New Central Bank Act) and applicable jurisprudence require a current and complete examination of the bank before it can be closed and placed under receivership. Section 30 of RA 7653 provides:

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SECTION 30. Proceedings in Receivership and Liquidation. Whenever, upon report of the head of the supervising or examining department, the Monetary Board finds that a bank or quasi-bank: (a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community; (b) has insufficient realizable assets, as determined by the [BSP] to meet its liabilities; or (c) cannot continue in business without involving probable losses to its depositors or creditors; or (d) has willfully violated a cease and desist order under Section 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution; in which cases, the Monetary Board may summarily and without need for prior hearing forbid the institution from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the banking institution. xxx xxx xxx The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final and executory, and may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition for certiorari may only be filed by the stockholders of record representing the majority of the capital stock within ten (10) days from receipt by the board of directors of the institution of the order directing receivership, liquidation or conservatorship. (Emphasis supplied) xxx xxx xxx Petitioners contend that there must be a current, thorough and complete examination before a bank can be closed under Section 30 of RA 7653. They argue that this section should be harmonized with Sections 25 and 28 of the same law: SECTION 25. Supervision and Examination. The [BSP] shall have supervision over, and conduct periodic or special examinations of, banking institutions and quasi-banks, including their subsidiaries and affiliates engaged in allied activities. xxx xxx xxx SECTION 28. Examination and Fees. The supervising and examining department head, personally or by deputy, shall examine the books of every banking institution once in every twelve (12) months, and at such other time as the Monetary Board by an affirmative vote of five (5) members may deem expedient and to make a report on the same to the Monetary Board: Provided that there shall be an interval of at least twelve (12) months between annual examinations. (Emphasis supplied) xxx xxx xxx According to the petitioners, it is clear from these provisions that the "report of the supervising or examining department" required under Section 30 refers to the report on the examination of the bank which, under Section 28, must be made to the MB after the supervising or examining head conducts an examination mandated by Sections 25 and 28.18 They cite Banco Filipino Savings & Mortgage Bank v. Monetary Board, Central Bank of the Philippines19 wherein the Court ruled: There is no question that under Section 29 of the Central Bank Act, the following are the mandatory requirements to be complied with before a bank found to be insolvent is ordered closed and forbidden to do business in the Philippines: Firstly, an examination shall be conducted by the head of the appropriate supervising or examining department or his examiners or agents into the condition of the bank; secondly, it shall be disclosed in the examination that the condition of the bank is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors; thirdly, the department head concerned shall inform the Monetary Board in writing, of the facts; and lastly, the Monetary Board shall find the statements of the department head to be true.20 (Emphasis supplied) Petitioners assert that an examination is necessary and not a mere report, otherwise the decision to close a bank would be arbitrary. Respondents counter that RA 7653 merely requires a report of the head of the supervising or examining department. They maintain that the term "report" under Section 30 and the word "examination" used in Section 29 of the old law are not synonymous. "Examination" connotes in-depth analysis, evaluation, inquiry or investigation while "report" connotes a simple disclosure or narration of facts for informative purposes.21 Petitioners contention has no merit. Banco Filipino and other cases petitioners cited22 were decided using Section 29 of the old law (RA 265): SECTION 29. Proceedings upon insolvency. Whenever, upon examination by the head of the appropriate supervising or examining department or his examiners or agents into the condition of any bank or non-bank financial intermediary performing quasi-banking functions, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in

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writing, to inform the Monetary Board of the facts. The Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and designate an official of the Central Bank or a person of recognized competence in banking or finance, as receiver to immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefits of its creditors, and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank or non-bank financial intermediary performing quasi-banking functions. (Emphasis supplied) xxx xxx xxx Thus in Banco Filipino, we ruled that an "examination [conducted] by the head of the appropriate supervising or examining department or his examiners or agents into the condition of the bank"23 is necessary before the MB can order its closure. However, RA 265, including Section 29 thereof, was expressly repealed by RA 7653 which took effect in 1993. Resolution No. 105 was issued on January 21, 2000. Hence, petitioners reliance on Banco Filipino which was decided under RA 265 was misplaced. In RA 7653, only a "report of the head of the supervising or examining department" is necessary. It is an established rule in statutory construction that where the words of a statute are clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation:24 This plain meaning rule or verba legis derived from the maxim index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a statute correctly express its intention or will and preclude the court from construing it differently. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by use of such words as are found in the statute. Verba legis non est recedendum, or from the words of a statute there should be no departure.25 The word "report" has a definite and unambiguous meaning which is clearly different from "examination." A report, as a noun, may be defined as "something that gives information" or "a usually detailed account or statement."26 On the other hand, an examination is "a search, investigation or scrutiny."27 This Court cannot look for or impose another meaning on the term "report" or to construe it as synonymous with "examination." From the words used in Section 30, it is clear that RA 7653 no longer requires that an examination be made before the MB can issue a closure order. We cannot make it a requirement in the absence of legal basis. Indeed, the court may consider the spirit and reason of the statute, where a literal meaning would lead to absurdity, contradiction, injustice, or would defeat the clear purpose of the lawmakers. 28 However, these problems are not present here. Using the literal meaning of "report" does not lead to absurdity, contradiction or injustice. Neither does it defeat the intent of the legislators. The purpose of the law is to make the closure of a bank summary and expeditious in order to protect public interest. This is also why prior notice and hearing are no longer required before a bank can be closed.29 Laying down the requisites for the closure of a bank under the law is the prerogative of the legislature and what its wisdom dictates. The lawmakers could have easily retained the word "examination" (and in the process also preserved the jurisprudence attached to it) but they did not and instead opted to use the word "report." The insistence on an examination is not sanctioned by RA 7653 and we would be guilty of judicial legislation were we to make it a requirement when such is not supported by the language of the law. What is being raised here as grave abuse of discretion on the part of the respondents was the lack of an examination and not the supposed arbitrariness with which the conclusions of the director of the Department of Rural Banks Supervision and Examination Sector had been reached in the report which became the basis of Resolution No. 105.1awphi1.net The absence of an examination before the closure of RBSM did not mean that there was no basis for the closure order. Needless to say, the decision of the MB and BSP, like any other administrative body, must have something to support itself and its findings of fact must be supported by substantial evidence. But it is clear under RA 7653 that the basis need not arise from an examination as required in the old law. We thus rule that the MB had sufficient basis to arrive at a sound conclusion that there were grounds that would justify RBSMs closure. It relied on the report of Mr. Domo-ong, the head of the supervising or examining department, with the findings that: (1) RBSM was unable to pay its liabilities as they became due in the ordinary course of business and (2) that it could not continue in business without incurring probable losses to its depositors and creditors. 30 The report was a 50-page memorandum detailing the facts supporting those grounds, an extensive chronology of events revealing the multitude of problems which faced RBSM and the recommendations based on those findings. In short, MB and BSP complied with all the requirements of RA 7653. By relying on a report before placing a bank under receivership, the MB and BSP did not only follow the letter of the law, they were also faithful to its spirit, which was to act expeditiously. Accordingly, the issuance of Resolution No. 105 was untainted with arbitrariness. Having dispensed with the issue decisive of this case, it becomes unnecessary to resolve the other minor issues raised.31 WHEREFORE, the petition is hereby DENIED. The March 28, 2000 decision and November 13, 2001 resolution of the Court of Appeals in CA-G.R. SP No. 57112 are AFFIRMED.

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Costs against petitioners. SO ORDERED.


RENATO C. CORONA Associate Justice

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THIRD DIVISION

G.R. No. 184778

October 2, 2009

BANGKO SENTRAL NG PILIPINAS MONETARY BOARD and CHUCHI FONACIER, Petitioners, vs. HON. NINA G. ANTONIO-VALENZUELA, in her capacity as Regional Trial Court Judge of Manila, Branch 28; RURAL BANK OF PARAAQUE, INC.; RURAL BANK OF SAN JOSE (BATANGAS), INC.; RURAL BANK OF CARMEN (CEBU), INC.; PILIPINO RURAL BANK, INC.; PHILIPPINE COUNTRYSIDE RURAL BANK, INC.; RURAL BANK OF CALATAGAN (BATANGAS), INC. (now DYNAMIC RURAL BANK); RURAL BANK OF DARBCI, INC.; RURAL BANK OF KANANGA (LEYTE), INC. (now FIRST INTERSTATE RURAL BANK); RURAL BANK OF BISAYAS MINGLANILLA (now BANK OF EAST ASIA); and SAN PABLO CITY DEVELOPMENT BANK, INC., Respondents.

DECISION

VELASCO, JR., J.:

The Case This is a Petition for Review on Certiorari under Rule 45 with Prayer for Issuance of a Temporary Restraining Order (TRO)/Writ of Preliminary Injunction, questioning the Decision dated September 30, 20081 of the Court of Appeals (CA) in CA-G.R. SP No. 103935. The CA Decision upheld the Order2 dated June 4, 2008 of the Regional Trial Court (RTC), Branch 28 in Manila, issuing writs of preliminary injunction in Civil Case Nos. 08-119243, 08-119244, 08-119245, 08-119246, 08-119247, 08-119248, 08-119249, 08119250, 08-119251, and 08-119273, and the Order dated May 21, 2008 that consolidated the civil cases. The Facts In September of 2007, the Supervision and Examination Department (SED) of the Bangko Sentral ng Pilipinas (BSP) conducted examinations of the books of the following banks: Rural Bank of Paraaque, Inc. (RBPI), Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen (Cebu), Inc., Pilipino Rural Bank, Inc., Philippine Countryside Rural Bank, Inc., Rural Bank of Calatagan (Batangas), Inc. (now Dynamic Rural Bank), Rural Bank of Darbci, Inc., Rural Bank of Kananga (Leyte), Inc. (now First Interstate Rural Bank), Rural Bank de Bisayas Minglanilla (now Bank of East Asia), and San Pablo City Development Bank, Inc. After the examinations, exit conferences were held with the officers or representatives of the banks wherein the SED examiners provided them with copies of Lists of Findings/Exceptions containing the deficiencies discovered during the examinations. These banks were then required to comment and to undertake the remedial measures stated in these lists within 30 days from their receipt of the lists, which remedial measures included the infusion of additional capital. Though the banks claimed that they made the additional capital infusions, petitioner Chuchi Fonacier, officer-in-charge of the SED, sent separate letters to the Board of Directors of each bank, informing them that the SED found that the banks failed to carry out the required remedial measures. In response, the banks requested that they be given time to obtain BSP approval to amend their Articles of Incorporation, that they have an opportunity to seek investors. They requested as well that the basis for the capital infusion figures be disclosed, and noted that none of them had received the Report of Examination (ROE) which finalizes the audit findings. They also requested meetings with the BSP audit teams to reconcile audit figures. In response, Fonacier reiterated the banks failure to comply with the directive for additional capital infusions. On May 12, 2008, the RBPI filed a complaint for nullification of the BSP ROE with application for a TRO and writ of preliminary injunction before the RTC docketed as Civil Case No. 08-119243 against Fonacier, the BSP, Amado M. Tetangco, Jr., Romulo L. Neri, Vicente B. Valdepenas, Jr., Raul A. Boncan, Juanita D. Amatong, Alfredo C. Antonio, and Nelly F. Villafuerte. RBPI prayed that Fonacier, her subordinates, agents, or any other person acting in her behalf be enjoined from submitting the ROE or any similar report to the Monetary Board (MB), or if the ROE had already been submitted, the MB be enjoined from acting on the basis of said ROE, on the allegation that the failure to furnish the bank with a copy of the ROE violated its right to due process. The Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen (Cebu), Inc., Pilipino Rural Bank, Inc., Philippine Countryside Rural Bank, Inc., Rural Bank of Calatagan (Batangas), Inc., Rural Bank of Darbci, Inc., Rural Bank of Kananga (Leyte), Inc., and Rural Bank de Bisayas Minglanilla followed suit, filing complaints with the RTC substantially similar to that of RBPI, including the reliefs prayed for, which were raffled to different branches and docketed as Civil Cases Nos. 08-119244, 08-119245, 08-119246, 08-119247, 08119248, 08-119249, 08-119250, and 08-119251, respectively. On May 13, 2008, the RTC denied the prayer for a TRO of Pilipino Rural Bank, Inc. The bank filed a motion for reconsideration the next day. On May 14, 2008, Fonacier and the BSP filed their opposition to the application for a TRO and writ of preliminary injunction in Civil Case No. 08-119243 with the RTC. Respondent Judge Nina Antonio-Valenzuela of Branch 28 granted RBPIs prayer for the issuance of a TRO. The other banks separately filed motions for consolidation of their cases in Branch 28, which motions were granted. Judge Valenzuela set the complaint of Rural Bank of San Jose (Batangas), Inc. for hearing on May 15, 2008. Petitioners assailed the validity of the consolidation of the nine cases before the RTC, alleging that the court had already prejudged the case by the earlier issuance of a TRO in Civil Case No. 08-119243, and moved for the inhibition of respondent judge. Petitioners filed a motion for reconsideration regarding the consolidation of the subject cases.

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On May 16, 2008, San Pablo City Development Bank, Inc. filed a similar complaint against the same defendants with the RTC, and this was docketed as Civil Case No. 08-119273 that was later on consolidated with Civil Case No. 08-119243. Petitioners filed an Urgent Motion to Lift/Dissolve the TRO and an Opposition to the earlier motion for reconsideration of Pilipino Rural Bank, Inc. On May 19, 2008, Judge Valenzuela issued an Order granting the prayer for the issuance of TROs for the other seven cases consolidated with Civil Case No. 08-119243. On May 21, 2008, Judge Valenzuela issued an Order denying petitioners motion for reconsideration regarding the consolidation of cases in Branch 28. On May 22, 2008, Judge Valenzuela granted the urgent motion for reconsideration of Pilipino Rural Bank, Inc. and issued a TRO similar to the ones earlier issued. On May 26, 2008, petitioners filed a Motion to Dismiss against all the complaints (except that of the San Pablo City Development Bank, Inc.), on the grounds that the complaints stated no cause of action and that a condition precedent for filing the cases had not been complied with. On May 29, 2008, a hearing was conducted on the application for a TRO and for a writ of preliminary injunction of San Pablo City Development Bank, Inc. The Ruling of the RTC After the parties filed their respective memoranda, the RTC, on June 4, 2008, ruled that the banks were entitled to the writs of preliminary injunction prayed for. It held that it had been the practice of the SED to provide the ROEs to the banks before submission to the MB. It further held that as the banks are the subjects of examinations, they are entitled to copies of the ROEs. The denial by petitioners of the banks requests for copies of the ROEs was held to be a denial of the banks right to due process. The dispositive portion of the RTCs order reads: WHEREFORE, the Court rules as follows: 1) Re: Civil Case No. 08-119243. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Rural Bank of Paranaque Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report. 2) Re: Civil Case No. 08-119244. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Rural Bank of San Jose (Batangas), Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report. 3) Re: Civil Case No. 08-119245. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Rural Bank of Carmen (Cebu), Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report. 4) Re: Civil Case No. 08-119246. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Pilipino Rural Bank Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report. 5) Re: Civil Case No. 08-119247. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Philippine Countryside Rural Bank Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case

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such a Report on Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report. 6) Re: Civil Case No. 08-119248. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Dynamic Bank Inc. (Rural Bank of Calatagan) is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report. 7) Re: Civil Case No. 08-119249. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Rural Bank of DARBCI, Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report. 8) Re: Civil Case No. 08-119250. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Rural Bank of Kananga Inc. (First Intestate Bank), is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report. 9) Re: Civil Case No. 08-119251. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Banco Rural De Bisayas Minglanilla (Cebu) Inc. (Bank of East Asia) is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report. 10) Re: Civil Case No. 08-119273. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff San Pablo City Development Bank, Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.3 The Ruling of the CA Petitioners then brought the matter to the CA via a petition for certiorari under Rule 65 claiming grave abuse of discretion on the part of Judge Valenzuela when she issued the orders dated May 21, 2008 and June 4, 2008. The CA ruled that the RTC committed no grave abuse of discretion when it ordered the issuance of a writ of preliminary injunction and when it ordered the consolidation of the 10 cases. It held that petitioners should have first filed a motion for reconsideration of the assailed orders, and failed to justify why they resorted to a special civil action of certiorari instead. The CA also found that aside from the technical aspect, there was no grave abuse of discretion on the part of the RTC, and if there was a mistake in the assessment of evidence by the trial court, that should be characterized as an error of judgment, and should be correctable via appeal. The CA held that the principles of fairness and transparency dictate that the respondent banks are entitled to copies of the ROE.

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Regarding the consolidation of the 10 cases, the CA found that there was a similarity of facts, reliefs sought, issues raised, defendants, and that plaintiffs and defendants were represented by the same sets of counsels. It found that the joint trial of these cases would prejudice any substantial right of petitioners. Finding that no grave abuse of discretion attended the issuance of the orders by the RTC, the CA denied the petition. On November 24, 2008, a TRO was issued by this Court, restraining the CA, RTC, and respondents from implementing and enforcing the CA Decision dated September 30, 2008 in CA-G.R. SP No. 103935.4 By reason of the TRO issued by this Court, the SED was able to submit their ROEs to the MB. The MB then prohibited the respondent banks from transacting business and placed them under receivership under Section 53 of Republic Act No. (RA) 8791 5 and Sec. 30 of RA 76536 through MB Resolution No. 1616 dated December 9, 2008; Resolution Nos. 1637 and 1638 dated December 11, 2008; Resolution Nos. 1647, 1648, and 1649 dated December 12, 2008; Resolution Nos. 1652 and 1653 dated December 16, 2008; and Resolution Nos. 1692 and 1695 dated December 19, 2008, with the Philippine Deposit Insurance Corporation as the appointed receiver. Now we resolve the main petition. Grounds in Support of Petition I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT THE INJUNCTION ISSUED BY THE REGIONAL TRIAL COURT VIOLATED SECTION 25 OF THE NEW CENTRAL BANK ACT AND EFFECTIVELY HANDCUFFED THE BANGKO SENTRAL FROM DISCHARGING ITS FUNCTIONS TO THE GREAT AND IRREPARABLE DAMAGE OF THE COUNTRYS BANKING SYSTEM; II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS ARE ENTITLED TO BE FURNISHED COPIES OF THEIR RESPECTIVE ROEs BEFORE THE SAME IS SUBMITTED TO THE MONETARY BOARD IN VIEW OF THE PRINCIPLES OF FAIRNESS AND TRANSPARENCY DESPITE LACK OF EXPRESS PROVISION IN THE NEW CENTRAL BANK ACT REQUIRING BSP TO DO THE SAME III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DEPARTING FROM WELL-ESTABLISHED PRECEPTS OF LAW AND JURISPRUDENCE A. THE EXCEPTIONS CITED BY PETITIONER JUSTIFIED RESORT TO PETITION FOR CERTIORARI UNDER RULE 65 INSTEAD OF FIRST FILING A MOTION FOR RECONSIDERATION B. RESPONDENT BANKS ACT OF RESORTING IMMEDIATELY TO THE COURT WAS PREMATURE SINCE IT WAS MADE IN UTTER DISREGARD OF THE PRINCIPLE OF PRIMARY JURISDICTION AND EXHAUSTION OF ADMINISTRATIVE REMEDY C. THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION BY THE REGIONAL TRIAL COURT WAS NOT ONLY IMPROPER BUT AMOUNTED TO GRAVE ABUSE OF DISCRETION7 Our Ruling The petition is meritorious. In Lim v. Court of Appeals it was stated: The requisites for preliminary injunctive relief are: (a) the invasion of right sought to be protected is material and substantial; (b) the right of the complainant is clear and unmistakable; and (c) there is an urgent and paramount necessity for the writ to prevent serious damage. As such, a writ of preliminary injunction may be issued only upon clear showing of an actual existing right to be protected during the pendency of the principal action. The twin requirements of a valid injunction are the existence of a right and its actual or threatened violations. Thus, to be entitled to an injunctive writ, the right to be protected and the violation against that right must be shown.8 These requirements are absent in the present case. In granting the writs of preliminary injunction, the trial court held that the submission of the ROEs to the MB before the respondent banks would violate the right to due process of said banks. This is erroneous. The respondent banks have failed to show that they are entitled to copies of the ROEs. They can point to no provision of law, no section in the procedures of the BSP that shows that the BSP is required to give them copies of the ROEs. Sec. 28 of RA 7653, or the

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New Central Bank Act, which governs examinations of banking institutions, provides that the ROE shall be submitted to the MB; the bank examined is not mentioned as a recipient of the ROE. The respondent banks cannot claim a violation of their right to due process if they are not provided with copies of the ROEs. The same ROEs are based on the lists of findings/exceptions containing the deficiencies found by the SED examiners when they examined the books of the respondent banks. As found by the RTC, these lists of findings/exceptions were furnished to the officers or representatives of the respondent banks, and the respondent banks were required to comment and to undertake remedial measures stated in said lists. Despite these instructions, respondent banks failed to comply with the SEDs directive. Respondent banks are already aware of what is required of them by the BSP, and cannot claim violation of their right to due process simply because they are not furnished with copies of the ROEs. Respondent banks were held by the CA to be entitled to copies of the ROEs prior to or simultaneously with their submission to the MB, on the principles of fairness and transparency. Further, the CA held that if the contents of the ROEs are essentially the same as those of the lists of findings/exceptions provided to said banks, there is no reason not to give copies of the ROEs to the banks. This is a flawed conclusion, since if the banks are already aware of the contents of the ROEs, they cannot say that fairness and transparency are not present. If sanctions are to be imposed upon the respondent banks, they are already well aware of the reasons for the sanctions, having been informed via the lists of findings/exceptions, demolishing that particular argument. The ROEs would then be superfluities to the respondent banks, and should not be the basis for a writ of preliminary injunction. Also, the reliance of the RTC on Banco Filipino v. Monetary Board 9 is misplaced. The petitioner in that case was held to be entitled to annexes of the Supervision and Examination Sectors reports, as it already had a copy of the reports themselves. It was not the subject of the case whether or not the petitioner was entitled to a copy of the reports. And the ruling was made after the petitioner bank was ordered closed, and it was allowed to be supplied with annexes of the reports in order to better prepare its defense. In this instance, at the time the respondent banks requested copies of the ROEs, no action had yet been taken by the MB with regard to imposing sanctions upon said banks. The issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the powers of the MB. Secs. 29 and 30 of RA 765310 refer to the appointment of a conservator or a receiver for a bank, which is a power of the MB for which they need the ROEs done by the supervising or examining department. The writs of preliminary injunction issued by the trial court hinder the MB from fulfilling its function under the law. The actions of the MB under Secs. 29 and 30 of RA 7653 "may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction." The writs of preliminary injunction order are precisely what cannot be done under the law by preventing the MB from taking action under either Sec. 29 or Sec. 30 of RA 7653. As to the third requirement, the respondent banks have shown no necessity for the writ of preliminary injunction to prevent serious damage. The serious damage contemplated by the trial court was the possibility of the imposition of sanctions upon respondent banks, even the sanction of closure. Under the law, the sanction of closure could be imposed upon a bank by the BSP even without notice and hearing. The apparent lack of procedural due process would not result in the invalidity of action by the MB. This was the ruling in Central Bank of the Philippines v. Court of Appeals.11 This "close now, hear later" scheme is grounded on practical and legal considerations to prevent unwarranted dissipation of the banks assets and as a valid exercise of police power to protect the depositors, creditors, stockholders, and the general public. The writ of preliminary injunction cannot, thus, prevent the MB from taking action, by preventing the submission of the ROEs and worse, by preventing the MB from acting on such ROEs. The trial court required the MB to respect the respondent banks right to due process by allowing the respondent banks to view the ROEs and act upon them to forestall any sanctions the MB might impose. Such procedure has no basis in law and does in fact violate the "close now, hear later" doctrine. We held in Rural Bank of San Miguel, Inc. v. Monetary Board, Bangko Sentral ng Pilipinas: It is well-settled that the closure of a bank may be considered as an exercise of police power. The action of the MB on this matter is final and executory. Such exercise may nonetheless be subject to judicial inquiry and can be set aside if found to be in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction.12 The respondent banks cannotthrough seeking a writ of preliminary injunction by appealing to lack of due process, in a roundabout manner prevent their closure by the MB. Their remedy, as stated, is a subsequent one, which will determine whether the closure of the bank was attended by grave abuse of discretion. Judicial review enters the picture only after the MB has taken action; it cannot prevent such action by the MB. The threat of the imposition of sanctions, even that of closure, does not violate their right to due process, and cannot be the basis for a writ of preliminary injunction. The "close now, hear later" doctrine has already been justified as a measure for the protection of the public interest. Swift action is called for on the part of the BSP when it finds that a bank is in dire straits. Unless adequate and determined efforts are taken by the government against distressed and mismanaged banks, public faith in the banking system is certain to deteriorate to the prejudice of the national economy itself, not to mention the losses suffered by the bank depositors, creditors, and stockholders, who all deserve the protection of the government.13 The respondent banks have failed to show their entitlement to the writ of preliminary injunction. It must be emphasized that an application for injunctive relief is construed strictly against the pleader.14 The respondent banks cannot rely on a simple appeal to procedural due process to prove entitlement. The requirements for the issuance of the writ have not been proved. No invasion of the rights of respondent banks has been shown, nor is their right to copies of the ROEs clear and unmistakable. There is also no necessity for the writ to prevent serious damage. Indeed the issuance of the writ of preliminary injunction tramples upon the powers of the MB and prevents it from fulfilling its functions. There is no right that the writ of preliminary injunction would protect in this particular case. In the absence of a clear legal right, the issuance of the injunctive writ constitutes grave abuse of discretion. 15 In the absence of proof of a legal right and the injury sustained by the plaintiff, an order for the issuance of a writ of preliminary injunction will be nullified.16

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Courts are hereby reminded to take greater care in issuing injunctive relief to litigants, that it would not violate any law. The grant of a preliminary injunction in a case rests on the sound discretion of the court with the caveat that it should be made with great caution.17 Thus, the issuance of the writ of preliminary injunction must have basis in and be in accordance with law. All told, while the grant or denial of an injunction generally rests on the sound discretion of the lower court, this Court may and should intervene in a clear case of abuse.18 WHEREFORE, the petition is hereby GRANTED. The assailed CA Decision dated September 30, 2008 in CA-G.R. SP No. 103935 is hereby REVERSED. The assailed order and writ of preliminary injunction of respondent Judge Valenzuela in Civil Case Nos. 08-119243, 08-119244, 08-119245, 08-119246, 08-119247, 08-119248, 08-119249, 08-119250, 08-119251, and 08-119273 are hereby declared NULL and VOID. SO ORDERED.
PRESBITERO J. VELASCO, JR. Associate Justice

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FIRST DIVISION

G.R. No. 169334

September 8, 2006

LETICIA G. MIRANDA, petitioner, vs. PHILIPPINE DEPOSIT INSURANCE CORPORATION, BANGKO SENTRAL NG PILIPINAS and PRIME SAVINGS BANK, Respondents.

DECISION

YNARES-SANTIAGO, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks a reversal of the Decision1 of the Court of Appeals dated February 23, 2005 in CA-G.R. CV No. 77556 which reversed and set aside the Decision 2 of the Regional Trial Court of Santiago City, Branch 35, in Civil Case No. 35-2844 and the July 7, 2005 Resolution denying petitioner's Motion for Reconsideration.3 Petitioner Leticia G. Miranda was a depositor of Prime Savings Bank, Santiago City Branch. On June 3, 1999, she withdrew substantial amounts from her account, but instead of cash she opted to be issued a crossed cashier's check. She was thus issued cashier's check no. 0000000518 in the sum of P2,500,000.00 and cashier's check no. 0000000514 in the amount of P3,002,000.00.4 Petitioner deposited the two checks into her account in another bank on the same day, however, Bangko Sentral ng Pilipinas (BSP) suspended the clearing privileges of Prime Savings Bank effective 2:00 p.m. of June 3, 1999. The two checks of petitioner were returned to her unpaid.5 On June 4, 1999, Prime Savings Bank declared a bank holiday. On January 7, 2000, the BSP placed Prime Savings Bank under the receivership of the Philippine Deposit Insurance Corporation (PDIC).6 Petitioner filed a civil action for sum of money in the Regional Trial Court of Santiago City, Isabela to recover the funds from her unpaid checks against Prime Savings Bank, PDIC and the BSP. Judgment on the pleadings was rendered on March 1, 2001, the dispositive portion of which reads: WHEREFORE, judgment is rendered against defendants namely: Philippine Deposit Insurance Corporation, Bangko Sentral ng Pilipinas and Prime Bank, to pay jointly and solidarily the amount of P5,502,000.00 to the plaintiff. SO ORDERED.7 On appeal, the Court of Appeals reversed the trial court and ruled in favor of the PDIC and BSP, dismissing the case against them, without prejudice to the right of petitioner to file her claim before the court designated to adjudicate on claims against Prime Savings Bank. The dispositive portion of the appellate court's decision dated February 23, 2005 thus reads: WHEREFORE, the appeal is GRANTED and the decision appealed from is REVERSED and SET ASIDE and the case is DISMISSED, without prejudice to the right of Miranda to file her claim before the court designated to adjudicate on claims against Prime Savings Bank. SO ORDERED.8 Petitioner's motion for reconsideration was denied,9 hence, this petition. The issues presented by the petitioner before this Court can be summarized as follows: (1) Whether the two cashier's checks operate as an assignment of funds in the hands of the petitioner; (2) Whether the claim lodged by the petitioner is a disputed claim under Section 30 of Republic Act (R.A.) No. 7653, otherwise known as the New Central Bank Act, and therefore, under the jurisdiction of the liquidation court; and (3) Whether the respondents are solidarily liable to the petitioner. Petitioner contends that she ceased to be a depositor upon withdrawal of her deposit and the issuance of the two cashier's checks to her. As a holder in due course of the cashier's checks as defined under Sections 52 and 191 of the Negotiable Instruments Law, she is an assignee of the funds of Prime Savings Bank as drawer thereof and entitled to its immediate payment.10 Petitioner next argues that the present claim is not a disputed claim in contemplation of Section 30 of the New Central Bank Act. Since disputed claims refer to all claims, whether they be against the assets of the insolvent bank, for specific performance, breach of contract, or damages, it is manifest that petitioner's claim cannot fall within the purview of a disputed claim because she is recovering assigned funds which are segregated monies of Prime Savings Bank.11 Petitioner further states that by the mere issuance of the cashier's check, the funds represented by the check are transferred from the credit of the maker to that of the payee or holder. Hence, petitioner alleges that she cannot be placed on the same footing with the ordinary creditors of the bank because Section 30 of R.A. No. 7653 is for equality among creditors. She avers that she is not a creditor thus is entitled to the immediate payment of her claim, pursuant to Section 189 of the Negotiable Instruments Law and existing jurisprudence. She argues that putting her on equal footing with ordinary creditors, would contravene the provisions of the Negotiable Instruments Law and would greatly diminish her rights as a holder in due course of said two cashier's checks.12

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Petitioner also argues that respondents PDIC and BSP contrary to Sections 185 and 189 of the Negotiable Instruments Law have caused damage to the petitioner and should be held solidarily liable by indemnifying the petitioner for the value of the two cashier's checks.13 Respondents, on the other hand, state that the mere issuance of the cashier's checks did not operate as assignment of funds in favor of the petitioner. They argue that even prior to the issuance of the cashier's checks, the bank was already cash-strapped, which negates petitioner's claim that there was an assignment of funds in her favor.14 There can be no assignment of funds when there is no funds to speak of in the first place. They likewise argue that the cashier's checks issued to petitioner were not certified but crossed, hence, there was no assignment of funds made by the cashier or manager of respondent Prime Savings Bank-Santiago City Branch as it had insufficient funds to meet the said checks either in its cash vault or with respondent BSP to clear the said checks.15 Respondents argue that the instant case involves a disputed claim of sum of money against a closed financial institution. Sections 30 and 31 of R.A. No. 7653, exclusively vests the authority to assess, evaluate and determine the condition of any bank with the BSP, while the PDIC has the primary responsibility of acting as receiver or liquidator of the closed financial institution.16 Since the relationship between petitioner and Prime Savings Bank is one of creditor and debtor, petitioner should file her claim with the liquidation court constituted precisely for purposes of adjudicating claims against the bank in accordance with the rules on concurrence and preference of credits.17 Respondent PDIC alleges that it was impleaded in its representative capacity as the receiver/liquidator of the closed institution, therefore, it has no direct, personal and solidary liability for the payment of the two cashier's checks. Its involvement came about only because a bank under receivership or liquidation cannot sue or be sued except through its receiver or liquidator.18 Respondent BSP also insists that not being a party to the said checks nor for imposing sanctions on co-respondent Prime Savings Bank, is not liable on the said crossed cashier's checks.19 Anent the first issue, the two cashier's checks issued by Prime Savings Bank do not constitute an assignment of funds in the hands of the petitioner as there were no funds to speak of in the first place. The bank was financially insolvent for sometime, even before the issuance of the checks on June 3, 1999. As the Court of Appeals correctly ruled, the issuance of the cashier's checks to petitioner did not constitute an assignment of funds, of which there was practically none at the time these were issued, as the bank was in dire financial straits for some time.20 As regards the second issue, the claim lodged by the petitioner qualifies as a disputed claim subject to the jurisdiction of the liquidation court. Regular courts do not have jurisdiction over actions filed by claimants against an insolvent bank, unless there is a clear showing that the action taken by the BSP, through the Monetary Board in the closure of financial institutions was in excess of jurisdiction, or with grave abuse of discretion. The power and authority of the Monetary Board to close banks and liquidate them thereafter when public interest so requires is an exercise of the police power of the State. Police power, however, is subject to judicial inquiry. It may not be exercised arbitrarily or unreasonably and could be set aside if it is either capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount to a denial of due process and equal protection clauses of the Constitution.21 "Disputed claims" refer to all claims, whether they be against the assets of the insolvent bank, for specific performance, breach of contract, damages, or whatever.22 Petitioner's claim which involved the payment of the two cashier's checks that were not honored by Prime Savings Bank due to its closure falls within the ambit of a claim against the assets of the insolvent bank. The issuance of the cashier's checks by Prime Savings Bank to the petitioner created a debtor/creditor relationship between them. This disputed claim should therefore be lodged in the liquidation proceedings by the petitioner as creditor, since the closure of Prime Savings Bank has rendered all claims subsisting at that time moot which can best be threshed out by the liquidation court and not the regular courts. It is well-settled in both law and jurisprudence that the Central Monetary Authority, through the Monetary Board, is vested with exclusive authority to assess, evaluate and determine the condition of any bank, and finding such condition to be one of insolvency, or that its continuance in business would involve a probable loss to its depositors or creditors, forbid bank or non-bank financial institution to do business in the Philippines; and shall designate an official of the BSP or other competent person as receiver to immediately take charge of its assets and liabilities.23 In Central Bank of the Philippines v. De la Cruz,24 we held that the actions of the Monetary Board in proceedings on insolvency are explicitly declared by law to be "final and executory." They may not be set aside, or restrained, or enjoined by the courts, except upon "convincing proof that the action is plainly arbitrary and made in bad faith. Hence, as clearly laid down in Ong v. Court of Appeals,25 the rationale behind judicial liquidation is intended to prevent multiplicity of actions against the insolvent bank. It is a pragmatic arrangement designed to establish due process and orderliness in the liquidation of the bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness. The lawmaking body contemplated that for convenience, only one court, if possible, should pass upon the claims against the insolvent bank and that the liquidation court should assist the Superintendent of Banks and regulate his operations. Regarding the third issue, it is only Prime Savings Bank that is liable to pay for the amount of the two cashier's checks. Solidary liability cannot attach to the BSP, in its capacity as government regulator of banks, and the PDIC as statutory receiver under R.A. No. 7653, because they are the principal government agencies mandated by law to determine the financial viability of banks and quasi-

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banks, and facilitate receivership and liquidation of closed financial institutions, upon a factual determination of the latter's insolvency. As correctly pointed out by the Court of Appeals, the BSP should not be held liable on the crossed cashier's checks for it was not a party to the issuance of the same; nor can it be held liable for imposing the sanctions on Prime Savings Bank which indirectly affected Miranda, since it is mandated under Sec. 37 of R.A. No. 7653 to act accordingly. 26 The BSP, through the Monetary Board was well within its discretion to exercise this power granted by law to issue a resolution suspending the interbank clearing privileges of Prime Savings Bank, having made a factual determination that the bank had deficient cash reserves deposited before the BSP. There is no showing that the BSP abused this discretionary power conferred upon it by law. In addition, co-respondent PDIC was impleaded as a party-litigant only in its representative capacity as the receiver/liquidator of Prime Savings Bank. Both BSP and PDIC cannot therefore be held directly and solidarily liable for the payment of the two cashier's checks. Sole liability rests with Prime Savings Bank. In the absence of fraud, the purchase of a cashier's check, like the purchase of a draft on a correspondent bank, creates the relation of creditor and debtor, not that of principal and agent, with the result that the purchaser or holder thereof is not entitled to a preference over general creditors in the assets of the bank issuing the check, when it fails before payment of the check. However, in a situation involving the element of fraud, where a cashier's check is purchased from a bank at a time when it is insolvent, as its officers know or are bound to know by the exercise of reasonable diligence, it has been held that the purchase is entitled to a preference in the assets of the bank on its liquidation before the check is paid.27 As correctly found by the Court of Appeals: Prime Savings as a bank did not collapse overnight but was hemorrhaging and in financial extremis for some time, a fact which could not have gone unnoticed by the bank officers. They could not have issued in good faith checks for the total sum of P5,502,000.00 knowing that the bank's coffers could not meet this.28 Clearly, there was fraud or the intent to deceive when the two cashier's checks dated June 3, 1999 were issued by Prime Savings Bank to the petitioner. In the distribution of assets of Prime Savings Bank, Section 31 of the New Central Bank Act which provides that "[i]n case of liquidation of a bank or quasi-bank, after payment of the cost of proceedings, including reasonable expenses and fees of the receiver to be allowed by the court, the receiver shall pay the debts of such institution, under order of the court, in accordance with the rules on concurrence and preference of credit as provided in the Civil Code," should apply. WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated February 23, 2005 and the Resolution dated July 7, 2005, in CA-G.R. CV No. 77556, are AFFIRMED with the MODIFICATION that petitioner Leticia G. Miranda is entitled to a preference in the assets of Prime Savings Bank in its liquidation for the amounts of P3,002,000.00 and P2,500,000.00, respectively stated in Cashier's Check No. 0000000514 and 0000000518 dated June 3, 1999 in the proceedings before the liquidation court designated to adjudicate on all claims against Prime Savings Bank, in accordance with the rules on concurrence and preference of credits as provided in the Civil Code. SO ORDERED.
Panganiban, C.J., Chairperson, Austria-Martinez, Callejo, Sr., Chico-Nazario, J.J., concur.

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EN BANC

G.R. Nos. 157294-95 November 30, 2006

Joseph Victor G. Ejercito, Petitioner, vs. Sandiganbayan (Special Division) and People of the Philippines, Respondents.

DECISION

CARPIO MORALES, J.:

The present petition for certiorari under Rule 65 assails the Sandiganbayan Resolutions dated February 7 and 12, 2003 denying petitioner Joseph Victor G. Ejercitos Motions to Quash Subpoenas Duces Tecum/Ad Testificandum, and Resolution dated March 11, 2003 denying his Motion for Reconsideration of the first two resolutions. The three resolutions were issued in Criminal Case No. 26558, "People of the Philippines v. Joseph Ejercito Estrada, et al.," for plunder, defined and penalized in R.A. 7080, "AN ACT DEFINING AND PENALIZING THE CRIME OF PLUNDER." In above-stated case of People v. Estrada, et al., the Special Prosecution Panel 1 filed on January 20, 2003 before the Sandiganbayan a Request for Issuance of Subpoena Duces Tecum for the issuance of a subpoena directing the President of Export and Industry Bank (EIB, formerly Urban Bank) or his/her authorized representative to produce the following documents during the hearings scheduled on January 22 and 27, 2003: I. For Trust Account No. 858; 1. Account Opening Documents; 2. Trading Order No. 020385 dated January 29, 1999; 3. Confirmation Advice TA 858; 4. Original/Microfilm copies, including the dorsal side, of the following: a. Bank of Commerce MC # 0256254 in the amount of P2,000,000.00; b. Urban bank Corp. MC # 34181 dated November 8, 1999 in the amount of P10,875,749.43; c. Urban Bank MC # 34182 dated November 8, 1999 in the amount of P42,716,554.22; d. Urban Bank Corp. MC # 37661 dated November 23, 1999 in the amount of P54,161,496.52; 5. Trust Agreement dated January 1999: Trustee: Joseph Victor C. Ejercito Nominee: URBAN BANK-TRUST DEPARTMENT Special Private Account No. (SPAN) 858; and 6. Ledger of the SPAN # 858. II. For Savings Account No. 0116-17345-9 SPAN No. 858 1. Signature Cards; and 2. Statement of Account/Ledger III. Urban Bank Managers Check and their corresponding Urban Bank Managers Check Application Forms, as follows: 1. MC # 039975 dated January 18, 2000 in the amount of P70,000,000.00;

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2. MC # 039976 dated January 18, 2000 in the amount of P2,000,000.00; 3. MC # 039977 dated January 18, 2000 in the amount of P2,000,000.00; 4. MC # 039978 dated January 18, 2000 in the amount of P1,000,000.00; The Special Prosecution Panel also filed on January 20, 2003, a Request for Issuance of Subpoena Duces Tecum/Ad Testificandum directed to the authorized representative of Equitable-PCI Bank to produce statements of account pertaining to certain accounts in the name of "Jose Velarde" and to testify thereon. The Sandiganbayan granted both requests by Resolution of January 21, 2003 and subpoenas were accordingly issued. The Special Prosecution Panel filed still another Request for Issuance of Subpoena Duces Tecum/Ad Testificandum dated January 23, 2003 for the President of EIB or his/her authorized representative to produce the same documents subject of the Subpoena Duces Tecum dated January 21, 2003 and to testify thereon on the hearings scheduled on January 27 and 29, 2003 and subsequent dates until completion of the testimony. The request was likewise granted by the Sandiganbayan. A Subpoena Duces Tecum/Ad Testificandum was accordingly issued on January 24, 2003. Petitioner, claiming to have learned from the media that the Special Prosecution Panel had requested for the issuance of subpoenas for the examination of bank accounts belonging to him, attended the hearing of the case on January 27, 2003 and filed before the Sandiganbayan a letter of even date expressing his concerns as follows, quoted verbatim: Your Honors: It is with much respect that I write this court relative to the concern of subpoenaing the undersigneds bank account which I have learned through the media. I am sure the prosecution is aware of our banking secrecy laws everyone supposed to observe. But, instead of prosecuting those who may have breached such laws, it seems it is even going to use supposed evidence which I have reason to believe could only have been illegally obtained. The prosecution was not content with a general request. It even lists and identifies specific documents meaning someone else in the bank illegally released confidential information. If this can be done to me, it can happen to anyone. Not that anything can still shock our family. Nor that I have anything to hide. Your Honors. But, I am not a lawyer and need time to consult one on a situation that affects every bank depositor in the country and should interest the bank itself, the Bangko Sentral ng Pilipinas, and maybe the Ombudsman himself, who may want to investigate, not exploit, the serious breach that can only harm the economy, a consequence that may have been overlooked. There appears to have been deplorable connivance. xxxx I hope and pray, Your Honors, that I will be given time to retain the services of a lawyer to help me protect my rights and those of every banking depositor. But the one I have in mind is out of the country right now. May I, therefore, ask your Honors, that in the meantime, the issuance of the subpoena be held in abeyance for at least ten (10) days to enable me to take appropriate legal steps in connection with the prosecutions request for the issuance of subpoena concerning my accounts. (Emphasis supplied) From the present petition, it is gathered that the "accounts" referred to by petitioner in his above-quoted letter are Trust Account No. 858 and Savings Account No. 0116-17345-9. 2 In open court, the Special Division of the Sandiganbayan, through Associate Justice Edilberto Sandoval, advised petitioner that his remedy was to file a motion to quash, for which he was given up to 12:00 noon the following day, January 28, 2003. Petitioner, unassisted by counsel, thus filed on January 28, 2003 a Motion to Quash Subpoena Duces Tecum/Ad Testificandum praying that the subpoenas previously issued to the President of the EIB dated January 21 and January 24, 2003 be quashed. 3 In his Motion to Quash, petitioner claimed that his bank accounts are covered by R.A. No. 1405 (The Secrecy of Bank Deposits Law) and do not fall under any of the exceptions stated therein. He further claimed that the specific identification of documents in the questioned subpoenas, including details on dates and amounts, could only have been made possible by an earlier illegal disclosure thereof by the EIB and the Philippine Deposit Insurance Corporation (PDIC) in its capacity as receiver of the then Urban Bank. The disclosure being illegal, petitioner concluded, the prosecution in the case may not be allowed to make use of the information.

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Before the Motion to Quash was resolved by the Sandiganbayan, the prosecution filed another Request for the Issuance of Subpoena Duces Tecum/Ad Testificandum dated January 31, 2003, again to direct the President of the EIB to produce, on the hearings scheduled on February 3 and 5, 2003, the same documents subject of the January 21 and 24, 2003 subpoenas with the exception of the Bank of Commerce MC #0256254 in the amount of P2,000,000 as Bank of Commerce MC #0256256 in the amount of P200,000,000 was instead requested. Moreover, the request covered the following additional documents: IV. For Savings Account No. 1701-00646-1: 1. Account Opening Forms; 2. Specimen Signature Card/s; and 3. Statements of Account. The prosecution also filed a Request for the Issuance of Subpoena Duces Tecum/Ad Testificandum bearing the same date, January 31, 2003, directed to Aurora C. Baldoz, Vice President-CR-II of the PDIC for her to produce the following documents on the scheduled hearings on February 3 and 5, 2003: 1. Letter of authority dated November 23, 1999 re: SPAN [Special Private Account Number] 858; 2. Letter of authority dated January 29, 2000 re: SPAN 858; 3. Letter of authority dated April 24, 2000 re: SPAN 858; 4. Urban Bank check no. 052092 dated April 24, 2000 for the amount of P36, 572, 315.43; 5. Urban Bank check no. 052093 dated April 24, 2000 for the amount of P107,191,780.85; and 6. Signature Card Savings Account No. 0116-17345-9. (Underscoring supplied) The subpoenas prayed for in both requests were issued by the Sandiganbayan on January 31, 2003. On February 7, 2003, petitioner, this time assisted by counsel, filed an Urgent Motion to Quash Subpoenae Duces Tecum/Ad Testificandum praying that the subpoena dated January 31, 2003 directed to Aurora Baldoz be quashed for the same reasons which he cited in the Motion to Quash 4 he had earlier filed. On the same day, February 7, 2003, the Sandiganbayan issued a Resolution denying petitioners Motion to Quash Subpoenae Duces Tecum/Ad Testificandum dated January 28, 2003. Subsequently or on February 12, 2003, the Sandiganbayan issued a Resolution denying petitioners Urgent Motion to Quash Subpoena Duces Tecum/Ad Testificandum dated February 7, 2003. Petitioners Motion for Reconsideration dated February 24, 2003 seeking a reconsideration of the Resolutions of February 7 and 12, 2003 having been denied by Resolution of March 11, 2003, petitioner filed the present petition. Raised as issues are: 1. Whether petitioners Trust Account No. 858 is covered by the term "deposit" as used in R.A. 1405; 2. Whether petitioners Trust Account No. 858 and Savings Account No. 0116-17345-9 are excepted from the protection of R.A. 1405; and 3. Whether the "extremely-detailed" information contained in the Special Prosecution Panels requests for subpoena was obtained through a prior illegal disclosure of petitioners bank accounts, in violation of the "fruit of the poisonous tree" doctrine. Respondent People posits that Trust Account No. 858 5 may be inquired into, not merely because it falls under the exceptions to the coverage of R.A. 1405, but because it is not even contemplated therein. For, to respondent People, the law applies only to "deposits" which strictly means the money delivered to the bank by which a creditor-debtor relationship is created between the depositor and the bank. The contention that trust accounts are not covered by the term "deposits," as used in R.A. 1405, by the mere fact that they do not entail a creditor-debtor relationship between the trustor and the bank, does not lie. An examination of the law shows that the term "deposits" used therein is to be understood broadly and not limited only to accounts which give rise to a creditor-debtor relationship between the depositor and the bank.

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The policy behind the law is laid down in Section 1: SECTION 1. It is hereby declared to be the policy of the Government to give encouragement to the people to deposit their money in banking institutions and to discourage private hoarding so that the same may be properly utilized by banks in authorized loans to assist in the economic development of the country. (Underscoring supplied) If the money deposited under an account may be used by banks for authorized loans to third persons, then such account, regardless of whether it creates a creditor-debtor relationship between the depositor and the bank, falls under the category of accounts which the law precisely seeks to protect for the purpose of boosting the economic development of the country. Trust Account No. 858 is, without doubt, one such account. The Trust Agreement between petitioner and Urban Bank provides that the trust account covers "deposit, placement or investment of funds" by Urban Bank for and in behalf of petitioner. 6 The money deposited under Trust Account No. 858, was, therefore, intended not merely to remain with the bank but to be invested by it elsewhere. To hold that this type of account is not protected by R.A. 1405 would encourage private hoarding of funds that could otherwise be invested by banks in other ventures, contrary to the policy behind the law. Section 2 of the same law in fact even more clearly shows that the term "deposits" was intended to be understood broadly: SECTION 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation. (Emphasis and underscoring supplied) The phrase "of whatever nature" proscribes any restrictive interpretation of "deposits." Moreover, it is clear from the immediately quoted provision that, generally, the law applies not only to money which is deposited but also to those which are invested. This further shows that the law was not intended to apply only to "deposits" in the strict sense of the word. Otherwise, there would have been no need to add the phrase "or invested." Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. 858. The protection afforded by the law is, however, not absolute, there being recognized exceptions thereto, as above-quoted Section 2 provides. In the present case, two exceptions apply, to wit: (1) the examination of bank accounts is upon order of a competent court in cases of bribery or dereliction of duty of public officials, and (2) the money deposited or invested is the subject matter of the litigation. Petitioner contends that since plunder is neither bribery nor dereliction of duty, his accounts are not excepted from the protection of R.A. 1405. Philippine National Bank v. Gancayco 7 holds otherwise: Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason is seen why these two classes of cases cannot be excepted from the rule making bank deposits confidential. The policy as to one cannot be different from the policy as to the other. This policy expresses the notion that a public office is a public trust and any person who enters upon its discharge does so with the full knowledge that his life, so far as relevant to his duty, is open to public scrutiny. Undoubtedly, cases for plunder involve unexplained wealth. Section 2 of R.A. No. 7080 states so. SECTION 2. Definition of the Crime of Plunder; Penalties. Any public officer who, by himself or in connivance with members of his family, relatives by affinity or consanguinity, business associates, subordinates or other persons, amasses, accumulates or acquires ill-gotten wealth through a combination or series of overt or criminal acts as described in Section 1(d) hereof, in the aggregate amount or total value of at least Seventy-five million pesos (P75,000,000.00), shall be guilty of the crime of plunder and shall be punished by life imprisonment with perpetual absolute disqualification from holding any public office. Any person who participated with said public officer in the commission of plunder shall likewise be punished. In the imposition of penalties, the degree of participation and the attendance of mitigating and extenuating circumstances shall be considered by the court. The court shall declare any and all ill-gotten wealth and their interests and other incomes and assets including the properties and shares of stock derived from the deposit or investment thereof forfeited in favor of the State. (Emphasis and underscoring supplied) An examination of the "overt or criminal acts as described in Section 1(d)" of R.A. No. 7080 would make the similarity between plunder and bribery even more pronounced since bribery is essentially included among these criminal acts. Thus Section 1(d) states: d) "Ill-gotten wealth" means any asset, property, business enterprise or material possession of any person within the purview of Section Two (2) hereof, acquired by him directly or indirectly through dummies, nominees, agents, subordinates and or business associates by any combination or series of the following means or similar schemes. 1) Through misappropriation, conversion, misuse, or malversation of public funds or raids on the public treasury;

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2) By receiving, directly or indirectly, any commission, gift, share, percentage, kickbacks or any other form of pecuniary benefit from any person and/or entity in connection with any government contract or project or by reason of the office or position of the public officer concerned; 3) By the illegal or fraudulent conveyance or disposition of assets belonging to the National Government or any of its subdivisions, agencies or instrumentalities or government-owned or -controlled corporations and their subsidiaries; 4) By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any other form of interest or participation including promise of future employment in any business enterprise or undertaking; 5) By establishing agricultural, industrial or commercial monopolies or other combinations and/or implementation of decrees and orders intended to benefit particular persons or special interests; or 6) By taking undue advantage of official position, authority, relationship, connection or influence to unjustly enrich himself or themselves at the expense and to the damage and prejudice of the Filipino people and the Republic of the Philippines. (Emphasis supplied) Indeed, all the above-enumerated overt acts are similar to bribery such that, in each case, it may be said that "no reason is seen why these two classes of cases cannot be excepted from the rule making bank deposits confidential." 8 The crime of bribery and the overt acts constitutive of plunder are crimes committed by public officers, and in either case the noble idea that "a public office is a public trust and any person who enters upon its discharge does so with the full knowledge that his life, so far as relevant to his duty, is open to public scrutiny" applies with equal force. Plunder being thus analogous to bribery, the exception to R.A. 1405 applicable in cases of bribery must also apply to cases of plunder. Respecting petitioners claim that the money in his bank accounts is not the "subject matter of the litigation," the meaning of the phrase "subject matter of the litigation" as used in R.A. 1405 is explained in Union Bank of the Philippines v. Court of Appeals, 9 thus: Petitioner contends that the Court of Appeals confuses the "cause of action" with the "subject of the action". In Yusingco v. Ong Hing Lian, petitioner points out, this Court distinguished the two concepts. x x x "The cause of action is the legal wrong threatened or committed, while the object of the action is to prevent or redress the wrong by obtaining some legal relief; but the subject of the action is neither of these since it is not the wrong or the relief demanded, the subject of the action is the matter or thing with respect to which the controversy has arisen, concerning which the wrong has been done, and this ordinarily is the property or the contract and its subject matter, or the thing in dispute." The argument is well-taken. We note with approval the difference between the subject of the action from the cause of action. We also find petitioners definition of the phrase subject matter of the action is consistent with the term subject matter of the litigation, as the latter is used in the Bank Deposits Secrecy Act. In Mellon Bank, N.A. v. Magsino, where the petitioner bank inadvertently caused the transfer of the amount of US$1,000,000.00 instead of only US$1,000.00, the Court sanctioned the examination of the bank accounts where part of the money was subsequently caused to be deposited: x x x Section 2 of [Republic Act No. 1405] allows the disclosure of bank deposits in cases where the money deposited is the subject matter of the litigation. Inasmuch as Civil Case No. 26899 is aimed at recovering the amount converted by the Javiers for their own benefit, necessarily, an inquiry into the whereabouts of the illegally acquired amount extends to whatever is concealed by being held or recorded in the name of persons other than the one responsible for the illegal acquisition." Clearly, Mellon Bank involved a case where the money deposited was the subject matter of the litigation since the money deposited was the very thing in dispute. x x x" (Emphasis and underscoring supplied) The plunder case now pending with the Sandiganbayan necessarily involves an inquiry into the whereabouts of the amount purportedly acquired illegally by former President Joseph Estrada. In light then of this Courts pronouncement in Union Bank, the subject matter of the litigation cannot be limited to bank accounts under the name of President Estrada alone, but must include those accounts to which the money purportedly acquired illegally or a portion thereof was alleged to have been transferred. Trust Account No. 858 and Savings Account No. 0116-17345-9 in the name of petitioner fall under this description and must thus be part of the subject matter of the litigation. In a further attempt to show that the subpoenas issued by the Sandiganbayan are invalid and may not be enforced, petitioner contends, as earlier stated, that the information found therein, given their "extremely detailed" character, could only have been obtained by the Special Prosecution Panel through an illegal disclosure by the bank officials concerned. Petitioner thus claims that, following the "fruit of the poisonous tree" doctrine, the subpoenas must be quashed.

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Petitioner further contends that even if, as claimed by respondent People, the "extremely-detailed" information was obtained by the Ombudsman from the bank officials concerned during a previous investigation of the charges against President Estrada, such inquiry into his bank accounts would itself be illegal. Petitioner relies on Marquez v. Desierto
10

where the Court held:

We rule that before an in camera inspection may be allowed there must be a pending case before a court of competent jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject matter of the pending case before the court of competent jurisdiction. The bank personnel and the account holder must be notified to be present during the inspection, and such inspection may cover only the account identified in the pending case. (Underscoring supplied) As no plunder case against then President Estrada had yet been filed before a court of competent jurisdiction at the time the Ombudsman conducted an investigation, petitioner concludes that the information about his bank accounts were acquired illegally, hence, it may not be lawfully used to facilitate a subsequent inquiry into the same bank accounts. Petitioners attempt to make the exclusionary rule applicable to the instant case fails. R.A. 1405, it bears noting, nowhere provides that an unlawful examination of bank accounts shall render the evidence obtained therefrom inadmissible in evidence. Section 5 of R.A. 1405 only states that "[a]ny violation of this law will subject the offender upon conviction, to an imprisonment of not more than five years or a fine of not more than twenty thousand pesos or both, in the discretion of the court." The case of U.S. v. Frazin,
11

involving the Right to Financial Privacy Act of 1978 (RFPA) of the United States, is instructive.

Because the statute, when properly construed, excludes a suppression remedy, it would not be appropriate for us to provide one in the exercise of our supervisory powers over the administration of justice. Where Congress has both established a right and provided exclusive remedies for its violation, we would "encroach upon the prerogatives" of Congress were we to authorize a remedy not provided for by statute. United States v. Chanen, 549 F.2d 1306, 1313 (9th Cir.), cert. denied, 434 U.S. 825, 98 S.Ct. 72, 54 L.Ed.2d 83 (1977). The same principle was reiterated in U.S. v. Thompson:
12

x x x When Congress specifically designates a remedy for one of its acts, courts generally presume that it engaged in the necessary balancing of interests in determining what the appropriate penalty should be. See Michaelian, 803 F.2d at 1049 (citing cases); Frazin, 780 F.2d at 1466. Absent a specific reference to an exclusionary rule, it is not appropriate for the courts to read such a provision into the act. Even assuming arguendo, however, that the exclusionary rule applies in principle to cases involving R.A. 1405, the Court finds no reason to apply the same in this particular case. Clearly, the "fruit of the poisonous tree" doctrine 13 presupposes a violation of law. If there was no violation of R.A. 1405 in the instant case, then there would be no "poisonous tree" to begin with, and, thus, no reason to apply the doctrine. How the Ombudsman conducted his inquiry into the bank accounts of petitioner is recounted by respondent People of the Philippines, viz: x x x [A]s early as February 8, 2001, long before the issuance of the Marquez ruling, the Office of the Ombudsman, acting under the powers granted to it by the Constitution and R.A. No. 6770, and acting on information obtained from various sources, including impeachment (of then Pres. Joseph Estrada) related reports, articles and investigative journals, issued a Subpoena Duces Tecum addressed to Urban Bank. (Attachment "1-b") It should be noted that the description of the documents sought to be produced at that time included that of numbered accounts 727, 737, 747, 757, 777 and 858 and included such names as Jose Velarde, Joseph E. Estrada, Laarni Enriquez, Guia Gomez, Joy Melendrez, Peachy Osorio, Rowena Lopez, Kevin or Kelvin Garcia. The subpoena did not single out account 858. xxxx Thus, on February 13, 2001, PDIC, as receiver of Urban Bank, issued a certification as to the availability of bank documents relating to A/C 858 and T/A 858 and the non-availability of bank records as to the other accounts named in the subpoena. (Attachments "2", "2-1" and "2-b) Based on the certification issued by PDIC, the Office of the Ombudsman on February 16, 2001 again issued a Subpoena Duces Tecum directed to Ms. Corazon dela Paz, as Interim Receiver, directing the production of documents pertinent to account A/C 858 and T/C 858. (Attachment "3") In compliance with the said subpoena dated February 16, 2001, Ms. Dela Paz, as interim receiver, furnished the Office of the Ombudsman certified copies of documents under cover latter dated February 21, 2001: 1. Transaction registers dated 7-02-99, 8-16-99, 9-17-99, 10-18-99, 11-22-99, 1-07-00, 04-03-00 and 04-24-00;

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2. Report of Unregularized TAFs & TDs for UR COIN A & B Placements of Various Branches as of February 29, 2000 and as of December 16, 1999; and 3. Trading Orders Nos. A No. 78102 and A No. 078125. Trading Order A No. 07125 is filed in two copies a white copy which showed "set up" information; and a yellow copy which showed "reversal" information. Both copies have been reproduced and are enclosed with this letter. We are continuing our search for other records and documents pertinent to your request and we will forward to you on Friday, 23 February 2001, such additional records and documents as we might find until then. (Attachment "4") The Office of the Ombudsman then requested for the mangers checks, detailed in the Subpoena Duces Tecum dated March 7, 2001. (Attachment "5") PDIC again complied with the said Subpoena Duces Tecum dated March 7, 2001 and provided copies of the managers checks thus requested under cover letter dated March 16, 2001. (Attachment "6") 14 (Emphasis in the original) The Sandiganbayan credited the foregoing account of respondent People. the Sandiganbayan.
15

The Court finds no reason to disturb this finding of fact by

The Marquez ruling notwithstanding, the above-described examination by the Ombudsman of petitioners bank accounts, conducted before a case was filed with a court of competent jurisdiction, was lawful. For the Ombudsman issued the subpoenas bearing on the bank accounts of petitioner about four months before Marquez was promulgated on June 27, 2001. While judicial interpretations of statutes, such as that made in Marquez with respect to R.A. No. 6770 or the Ombudsman Act of 1989, are deemed part of the statute as of the date it was originally passed, the rule is not absolute. Columbia Pictures, Inc. v. Court of Appeals
16

teaches:

It is consequently clear that a judicial interpretation becomes a part of the law as of the date that law was originally passed, subject only to the qualification that when a doctrine of this Court is overruled and a different view is adopted, and more so when there is a reversal thereof, the new doctrine should be applied prospectively and should not apply to parties who relied on the old doctrine and acted in good faith. (Emphasis and underscoring supplied) When this Court construed the Ombudsman Act of 1989, in light of the Secrecy of Bank Deposits Law in Marquez, that "before an in camera inspection may be allowed there must be a pending case before a court of competent jurisdiction", it was, in fact, reversing an earlier doctrine found in Banco Filipino Savings and Mortgage Bank v. Purisima 17. Banco Filipino involved subpoenas duces tecum issued by the Office of the Ombudsman, then known as the Tanodbayan, course of its preliminary investigation of a charge of violation of the Anti-Graft and Corrupt Practices Act.
18

in the

While the main issue in Banco Filipino was whether R.A. 1405 precluded the Tanodbayans issuance of subpoena duces tecum of bank records in the name of persons other than the one who was charged, this Court, citing P.D. 1630, 19 Section 10, the relevant part of which states: (d) He may issue a subpoena to compel any person to appear, give sworn testimony, or produce documentary or other evidence the Tanodbayan deems relevant to a matter under his inquiry, held that "The power of the Tanodbayan to issue subpoenae ad testificandum and subpoenae duces tecum at the time in question is not disputed, and at any rate does not admit of doubt." 20 As the subpoenas subject of Banco Filipino were issued during a preliminary investigation, in effect this Court upheld the power of the Tandobayan under P.D. 1630 to issue subpoenas duces tecum for bank documents prior to the filing of a case before a court of competent jurisdiction. Marquez, on the other hand, practically reversed this ruling in Banco Filipino despite the fact that the subpoena power of the Ombudsman under R.A. 6770 was essentially the same as that under P.D. 1630. Thus Section 15 of R.A. 6770 empowers the Office of the Ombudsman to (8) Administer oaths, issue subpoena and subpoena duces tecum, and take testimony in any investigation or inquiry, including the power to examine and have access to bank accounts and records;

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A comparison of this provision with its counterpart in Sec. 10(d) of P.D. 1630 clearly shows that it is only more explicit in stating that the power of the Ombudsman includes the power to examine and have access to bank accounts and records which power was recognized with respect to the Tanodbayan through Banco Filipino. The Marquez ruling that there must be a pending case in order for the Ombudsman to validly inspect bank records in camera thus reversed a prevailing doctrine. 21 Hence, it may not be retroactively applied. The Ombudsmans inquiry into the subject bank accounts prior to the filing of any case before a court of competent jurisdiction was therefore valid at the time it was conducted. Likewise, the Marquez ruling that "the account holder must be notified to be present during the inspection" may not be applied retroactively to the inquiry of the Ombudsman subject of this case. This ruling is not a judicial interpretation either of R.A. 6770 or R.A. 1405, but a "judge-made" law which, as People v. Luvendino 22 instructs, can only be given prospective application: x x x The doctrine that an uncounselled waiver of the right to counsel is not to be given legal effect was initially a judge-made one and was first announced on 26 April 1983 in Morales v. Enrile and reiterated on 20 March 1985 in People v. Galit. x x x While the Morales-Galit doctrine eventually became part of Section 12(1) of the 1987 Constitution, that doctrine affords no comfort to appellant Luvendino for the requirements and restrictions outlined in Morales and Galit have no retroactive effect and do not reach waivers made prior to 26 April 1983 the date of promulgation of Morales. (Emphasis supplied) In fine, the subpoenas issued by the Ombudsman in this case were legal, hence, invocation of the "fruit of the poisonous tree" doctrine is misplaced. At all events, even if the challenged subpoenas are quashed, the Ombudsman is not barred from requiring the production of the same documents based solely on information obtained by it from sources independent of its previous inquiry. In particular, the Ombudsman, even before its inquiry, had already possessed information giving him grounds to believe that (1) there are bank accounts bearing the number "858," (2) that such accounts are in the custody of Urban Bank, and (3) that the same are linked with the bank accounts of former President Joseph Estrada who was then under investigation for plunder. Only with such prior independent information could it have been possible for the Ombudsman to issue the February 8, 2001 subpoena duces tecum addressed to the President and/or Chief Executive Officer of Urban Bank, which described the documents subject thereof as follows: (a) bank records and all documents relative thereto pertaining to all bank accounts (Savings, Current, Time Deposit, Trust, Foreign Currency Deposits, etc) under the account names of Jose Velarde, Joseph E. Estrada, Laarni Enriquez, Guia Gomez, Joy Melendrez, Peach Osorio, Rowena Lopez, Kevin or Kelvin Garcia, 727, 737, 747, 757, 777 and 858. (Emphasis and underscoring supplied) The information on the existence of Bank Accounts bearing number "858" was, according to respondent People of the Philippines, obtained from various sources including the proceedings during the impeachment of President Estrada, related reports, articles and investigative journals. 23 In the absence of proof to the contrary, this explanation proffered by respondent must be upheld. To presume that the information was obtained in violation of R.A. 1405 would infringe the presumption of regularity in the performance of official functions. Thus, with the filing of the plunder case against former President Estrada before the Sandiganbayan, the Ombudsman, using the above independent information, may now proceed to conduct the same investigation it earlier conducted, through which it can eventually obtain the same information previously disclosed to it by the PDIC, for it is an inescapable fact that the bank records of petitioner are no longer protected by R.A. 1405 for the reasons already explained above. Since conducting such an inquiry would, however, only result in the disclosure of the same documents to the Ombudsman, this Court, in avoidance of what would be a time-wasteful and circuitous way of administering justice, 24 upholds the challenged subpoenas. Respecting petitioners claim that the Sandiganbayan violated his right to due process as he was neither notified of the requests for the issuance of the subpoenas nor of the grant thereof, suffice it to state that the defects were cured when petitioner ventilated his arguments against the issuance thereof through his earlier quoted letter addressed to the Sandiganbayan and when he filed his motions to quash before the Sandiganbayan. IN SUM, the Court finds that the Sandiganbayan did not commit grave abuse of discretion in issuing the challenged subpoenas for documents pertaining to petitioners Trust Account No. 858 and Savings Account No. 0116-17345-9 for the following reasons: 1. These accounts are no longer protected by the Secrecy of Bank Deposits Law, there being two exceptions to the said law applicable in this case, namely: (1) the examination of bank accounts is upon order of a competent court in cases of bribery or dereliction of duty of public officials, and (2) the money deposited or invested is the subject matter of the litigation. Exception (1) applies since the plunder case pending against former President Estrada is analogous to bribery or dereliction of duty, while

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exception (2) applies because the money deposited in petitioners bank accounts is said to form part of the subject matter of the same plunder case. 2. The "fruit of the poisonous tree" principle, which states that once the primary source (the "tree") is shown to have been unlawfully obtained, any secondary or derivative evidence (the "fruit") derived from it is also inadmissible, does not apply in this case. In the first place, R.A. 1405 does not provide for the application of this rule. Moreover, there is no basis for applying the same in this case since the primary source for the detailed information regarding petitioners bank accounts the investigation previously conducted by the Ombudsman was lawful. 3. At all events, even if the subpoenas issued by the Sandiganbayan were quashed, the Ombudsman may conduct on its own the same inquiry into the subject bank accounts that it earlier conducted last February-March 2001, there being a plunder case already pending against former President Estrada. To quash the challenged subpoenas would, therefore, be pointless since the Ombudsman may obtain the same documents by another route. Upholding the subpoenas avoids an unnecessary delay in the administration of justice. WHEREFORE, the petition is DISMISSED. The Sandiganbayan Resolutions dated February 7 and 12, 2003 and March 11, 2003 are upheld. The Sandiganbayan is hereby directed, consistent with this Courts ruling in Marquez v. Desierto, to notify petitioner as to the date the subject bank documents shall be presented in court by the persons subpoenaed. SO ORDERED.
CONCHITA CARPIO MORALES

Associate Justice

CONCURRING OPINION

CALLEJO, SR., J.

I concur in the encompassing ponencia of our esteemed colleague Mme. Justice Conchita Carpio-Morales, however, I find it imperative to submit my concurring opinion and elucidate on the basis thereof. The basic factual and procedural antecedents of the case are restated as follows: In connection with Criminal Cases Nos. 26558 (Plunder) and 26565 (Illegal Use of Alias) filed against former President Joseph Ejercito Estrada, and upon the written requests of the Special Prosecution Panel, the Sandiganbayan issued the subpoenae duces tecum/ad testificandum dated January 21 and 24, 2003 addressed to the respective Presidents of the Export and Industry Bank (EIB, formerly Urban Bank and Urbancorp Investment, Inc.) and Equitable-PCIBank. The subpoenas directed the said officers, or their authorized representatives, to appear before the Sandiganbayan and bring with them documents, among others, pertaining to Trust Account No. 858 (with Urban Bank) and Savings Account No. 0116-17345-9 (also with Urban Bank), both in the name of petitioner Joseph Victor (JV) G. Ejercito. The written requests of the Special Prosecution Panel enumerated the following documents to be subpoenaed as follows: I. For Trust Account No. 858: 1. Account Opening Documents; 2. Trading Order No. 020385, dated January 29, 1999; 3. Confirmation Advice TA 858; 4. Original/Microfilm copies, including the dorsal side of the following: a) Bank of Commerce MC#0256254 in the amount of P2,000,000; b) Urban Bank Corp. MC#34181 dated November 8, 1999 in the amount of P10,875,749.43; c) Urban Bank MC#34182 dated November 8, 1999 in the amount of P42,716,554.22; d) Urban Bank MC#37661 dated November 23, 1999 in the amount of P54,161,496.52; 5. Trust Agreement dated January 1999

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Trustee: Joseph Victor C. Ejercito Nominee: URBAN BANK-TRUST DEPARTMENT Special Private Account No. (SPAN) 858; and 6. Ledger of the Span #858 II. For Savings Account No. 0116-17345-9 SPAN #858 1. signature cards; and 2. statement of account/ledger III Urban Bank Managers Check and their corresponding Urban Banks Check Application Form as follows: 1. MC#039975 dated January 18, 2000 in the amount of P70,000,000.00; 2. MC#039976 dated January 18, 2000 in the amount of P2,000,000.00; 3. MC#039977 dated January 18, 2000 in the amount of P2,000,000.00; and 4. MC#039978 dated January 18, 2000 in the amount of P1,000,000.00. Claiming to have learned about the subpoenae duces tecum/ad testificandum only through news reports, petitioner JV Ejercito filed motions to quash them alleging that (a) they violated the bank secrecy laws (Republic Act No. 1405 1 as amended by Presidential Decree No. 1792 and Republic Act 8791); (b) his case is not one of the recognized exceptions enumerated in the said laws as he is not an accused in the plunder and illegal use of alias cases; (c) there appears to be a conspiracy between the bank officials and the prosecution to violate the bank secrecy laws as the requests for the subpoenas contained particulars which could have been known only if the bank had released in advance the information containing the details of his bank accounts; (d) under Republic Act No. 3019 2 inquiry by subpoena into bank deposits can only be had if it was established that: (1) the accused public official has been found to have acquired during his incumbency an amount of property manifestly out of proportion to his salary; (2) the ownership of the property unlawfully acquired is concealed by recording the same in the name of friends or relatives; and (3) the acquisition through legitimate means of the money so deposited cannot be satisfactorily shown. Former President Estrada for himself likewise moved for the quashal of the subpoenas on the same grounds relied upon by petitioner JV Ejercito and, additionally, that the documents sought were not relevant to the amended information against him. Acting thereon, the Sandiganbayan issued the assailed Resolution dated February 7, 2003, denying the motions to quash the subpoenas holding that its issuance of the same properly falls under one of the exceptions to the bank secrecy laws, particularly the clause in Section 2 of Republic Act (RA) 1405 thus: "upon order of a competent court in cases of bribery or dereliction of duty of public officials." The Sandiganbayan reasoned that the crime of plunder was analogous to the said cases. It opined that the fact that petitioner JV Ejercito was not an accused in the plunder cases was of no moment because RA 3019 allows the inquiry into the bank deposits not only of the accused public official but also those of his spouse and children. Further, whether or not the amount of deposits was manifestly out of proportion to the income need not be proved first before inquiry could be had on the bank deposits, rather such inquiry could be used in proving the case. The Sandiganbayan also held that petitioner JV Ejercitos reliance on Marquez v. Desierto 3 was misplaced. In Marquez, the Court disallowed the in camera inspection of accounts in connection with a case pending before the Ombudsman. In the present case, however, the Sandiganbayan held that there was precisely a pending case before it, a competent court within the meaning of the exception to the bank secrecy laws. The Sandiganbayan also pointed out that there was nothing irregular in the issuance of the subpoenas because it was not required that the other party be notified of such requests. No violation of due process resulted by such lack of notice since the other parties would have ample opportunity to examine the witnesses and documents subpoenaed once they are presented in court. A similar motion was filed by petitioner JV Ejercito involving the subpoenae duces tecum/ad testificandum issued to the representative of the Urban Bank and Mrs. Aurora Baldoz of the Philippine Deposit Insurance Commission (PDIC). The said motion was denied by Sandiganbayan in the assailed Resolution dated February 12, 2003. The motions for reconsideration were denied in the assailed Resolution dated March 11, 2003. Petitioner JV Ejercito now comes to the Court assailing the Sandiganbayans resolutions denying his motions to quash the subpoenae duces tecum/ad testificandum. As the petitioner himself submits, the following are the issues for the Courts resolution:

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WHETHER OR NOT RESPONDENT COURT ACTED IN EXCESS OF ITS JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION IN RULING THAT THE SUBPOENA ON PETITIONERS BANK ACCOUNTS FALLS UNDER THE EXCEPTIONS PROVIDED UNDER R.A. NO. 1405 WHETHER OR NOT RESPONDENT COURT ACTED IN EXCESS OF ITS JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION IN RULING THAT THE CASES OF PNB VS. GANCAYCO AND BANCO FILIPINO VS. PURISIMA ARE APPLICABLE TO THE INSTANT CASE WHETHER OR NOT RESPONDENT COURT ACTED IN EXCESS OF ITS JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION IN RULING THAT THE MARQUEZ VS. DESIERTO CASE IS NOT APPLICABLE TO THE INSTANT CASE. 4 The petitioner does not deny his ownership of Trust Account No. 858 and Savings Account No. 0116-17345-9. In fact, he expressly admits the same and even explains that these were originally opened at Urban Bank but are now maintained at Export and Industry Bank. 5 The petitioner argues that his accounts do not fall under any of the exceptions enumerated under Section 2 of RA 1405. The said provision reads: Sec. 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except, when the examination is made in the course of a special or general examination of a bank and is specifically authorized by the Monetary Board after being satisfied that there is reasonable ground to believe that a bank fraud or serious irregularity has been or is being committed and that it is necessary to look into the deposit to establish such fraud or irregularity, or when the examination is made by an independent auditor hired by the bank to conduct its regular audit provided that the examination is for audit purposes only and the results thereof shall be for the exclusive use of the bank, or upon written permission of the depositor, or in case of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of litigation. (As amended by PD No. 1792) Based on this provision, it has been declared that bank deposits are absolutely confidential except in the following instances: (1) In an examination made in the course of a special or general examination of a bank that is specifically authorized by the Monetary Board after being satisfied that there is reasonable ground to believe that a bank fraud or serious irregularity has been or is being committed and that it is necessary to look into the deposit to establish such fraud or irregularity; (2) In an examination made by an independent auditor hired by the bank to conduct its regular audit provided that the examination is for audit purposes only and the results thereof shall be for the exclusive use of the bank; (3) Upon written permission of the depositor; (4) In cases of impeachment; (5) Upon order of a competent court in cases of bribery or dereliction of duty of public officials; or (6) In cases where the money deposited or invested is the subject matter of litigation.
6

The petitioner points out that one of the exceptions mentioned is "upon order of a competent court in cases of bribery or dereliction of duty of public officials." Since the cases filed against his father, former President Estrada, are not for these crimes but for plunder and illegal use of alias, then the said exception does not allegedly apply. Further, his accounts do not fall under exception (6) as they are not allegedly "subject matter of litigation." This argument of the petitioner is not persuasive. Former President Estrada is being charged with plunder as defined and penalized under Section 2 of RA 7080, 7 to wit: Definition of the Crime of Plunder, Penalties. Any public officer who, by himself or in connivance with members of his family, relatives by affinity or consanguinity, business associates, subordinates or other persons, amasses, accumulates or acquires ill-gotten wealth through a combination or series of overt or criminal acts as described in Section 1(d) hereof in the aggregate amount or total value of at least Fifty million pesos (P50,000,000.00) shall be guilty of the crime of plunder and shall be punished by reclusion perpetua to death. Any person who participated with the said public officer in the commission of an offense contributing to the crime of plunder shall likewise be punished for such offense. In the imposition of penalties, the degree of participation and the attendance of mitigating and extenuating circumstances, as provided by the Revised Penal Code, shall be considered by the court. The court shall declare any and all ill-gotten wealth and their interest and other incomes and assets including the properties and shares of stocks derived from the deposit or investment thereof forfeited in favor of the State. (As amended by Sec. 12, RA 7659). Section 1(d) of the same law defines "ill-gotten wealth" as "any asset, property, business enterprise or material possession of any person within the purview of Section 2 thereof, acquired by him directly or indirectly through dummies, nominees, agents, subordinates, and/or business associates by any combination or series of the following means or similar schemes: 1. Through misappropriation, conversion, misuse or malversation of public funds or raids on the public treasury;

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2. By receiving, directly or indirectly, any commission, gift, share, percentage, kickbacks or any other form of pecuniary benefit from any person and/or entity in connection with any government contract or project or by reason of the office or position of the public officer concerned; 3. By the illegal or fraudulent conveyance or disposition of assets belonging to the National Government or any of its subdivisions, agencies or instrumentalities, or government-owned or controlled corporations and their subsidiaries; 4. By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any other form of interest or participation including the promise of future employment in any business enterprise or undertaking; 5. By establishing agricultural, industrial or commercial monopolies or other combination and/or implementation of decrees and others intended to benefit particular persons or special interests; or 6. By taking undue advantage of official position, authority, relationship, connection or influence to unjustly enrich himself or themselves at the expense and to the damage and prejudice of the Filipino people and the Republic of the Philippines. It can be readily gleaned that the gravamen of plunder is the amassing, accumulating or acquiring of ill-gotten wealth by a public officer, his family or close associates. In Philippine National Bank v. Gancayco, 8 the Court explained that "cases of unexplained wealth are similar to cases of bribery or dereliction of public duty and no reason is seen why these two classes of cases cannot be excepted from the rule making bank deposits confidential. The policy as to one cannot be different from the policy as to the other. This policy expresses the notion that a public office is a public trust and any person enters upon its discharge does so with full knowledge that his life, so far as relevant to his duty, is open to public scrutiny." 9 A plain reading of the definition of plunder and the manner by which it may be committed as provided in RA 7080 reveals that its policy also rests upon the fundamental tenet that "public office is a public trust." 10 There is thus no cogent reason to treat plunder any different from the cases of bribery or dereliction of public duty for purposes of RA 1405. The petitioner next contends that Gancayco and Banco Filipino Savings v. Purisima, 11 insofar as they expounded Section 8 of RA 3019 are not applicable to his case. He reasons that in these cases, when the subpoenas subject thereof were issued, the text of Section 8 of RA 3019 provided that: "x x x Properties in the name of the spouse and unmarried children of such public official may be taken into consideration x x x. Bank deposits shall be taken into consideration in the enforcement of this section, notwithstanding any provision of law to the contrary notwithstanding." On the other hand, Section 8 of RA 3019, as presently worded upon its amendment by Batas Pambansa Blg. 195 on March 16, 1986, reads: SEC. 8. Prima facie evidence of and dismissal due to unexplained wealth. If in accordance with the provisions of Republic Act Numbered One thousand three hundred seventy-nine, a public official has been found to have acquired during his incumbency, whether in his name or in the name of other persons, an amount of property and/or money manifestly out of proportion to his salary and to his other lawful income, that fact shall be a ground for dismissal or removal. Properties in the name of the spouse and dependents of such public official may be taken into consideration, when their acquisition through legitimate means cannot be satisfactorily shown. Bank deposits in the name of or manifestly excessive expenditures incurred by the public official, his spouse or any of their dependents including but not limited to activities in any club or association or any ostentatious display of wealth including frequent travel abroad of a non-official character by any public official when such activities entail expenses evidently out of proportion to legitimate income, shall likewise be taken into consideration in the enforcement of this section, notwithstanding any provision of law to the contrary. The circumstances hereinabove mentioned shall constitute valid ground for the administrative suspension of the public official concerned for an indefinite period until the investigation of the unexplained wealth is completed. The petitioner theorizes that prior to the amendment, the following may be taken into consideration in the enforcement of Section 8 of RA 3019: c) properties in the name of the spouse and unmarried children of the public official; and d) bank deposits (without any qualification by law).
12

After its amendment on March 16, 1982, the following may allegedly be taken into consideration in the enforcement of Section 8 of RA 3019: c) properties in the name of the spouse and dependents of the public official; and d) bank deposits in the name of the public official, his spouse or any of their dependents. 13 According to the petitioner, although he is the son of former President Estrada, he is absolutely not his dependent. Petitioner avers that he is in his own right a legitimate businessman having investments in several entities when he opened the subject accounts in Urban Bank, now Export and Industry Bank. Further, he is also the Municipal Mayor of San Juan, Manila. He thus urges the Court against applying the rulings in Gancayco and Banco Filipino in the light of the amendment of Section 8 of RA 3019.

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The petitioners contention is equally unpersuasive. It should be recalled that the petitioner in Banco Filipino posited that the inquiry into illegally acquired property should be restricted to property held by or in the name of the government official or employee or his spouses and unmarried children. The Court rejected this argument as it pronounced that: To sustain the petitioners theory, and restrict the inquiry only to property held by or in the name of the government official or employee, or his spouse and unmarried children is unwarranted in the light of the provisions of the statutes in question, and would make available to persons in government who illegally acquired property an easy and fool-proof means of evading investigation and prosecution; all they would have to do would be to simply place the property in the possession or name of persons other than their spouse and unmarried children. This is an absurdity that we will not ascribe to the lawmakers. 14 At this point, it is well to mention that based on the evidence presented by the prosecution before the Sandiganbayan, hundreds of millions of pesos flowed from the petitioners Trust Account No. 858 to the alleged Jose Velarde account purportedly maintained by former President Estrada at Equitable PCIBank. In fact, one managers check, marked as Exhibit "L" for the prosecution, in the amount of P107,191,780.85 was drawn from, and funded by the said trust account of petitioner JV Ejercito. Considering the mind-boggling sums of money that flowed out of the petitioners Trust Account No. 858 and its nexus to former President Estradas alleged Jose Velarde account, it is logical for the prosecution to pursue the theory that the money in the said trust account forms part of the unexplained wealth of the latter. As such, the money in the accounts of the petitioner may be properly considered as "subject matter" of the plunder cases falling under number (6) of the enumerated exceptions to the absolute confidentiality of bank deposits. Viewed in this context, the petitioners assertion that since he is no longer a dependent of his father, then the rulings in Gancayco and Banco Filipino are not applicable to his case is, to say the least, quite lame. In fact, to sustain his theory would, as the Court stated in Banco Filipino, "make available to persons in government who illegally acquired property an easy and fool-proof means of evading investigation and prosecution; all they would have to do would be to simply place the property in the possession or name of persons other than their spouse and unmarried children. This is an absurdity that we will not ascribe to the lawmakers." 15 The petitioner bewails the "extremely-detailed" information contained in the Special Prosecution Panels requests for the subpoenae duces tecum/ad testificandum. The information upon which the requests were based was allegedly illegally and improperly obtained. The petitioner opines that there had been prior disclosure by the bank and its personnel of data and information relative to his trust and savings accounts considering the very detailed information contained in the request for the subpoenas, to wit: a) Trading Order No. 020385 dated January 29, 1999; b) Confirmation Advice TA 858; c) Trust Agreement dated January 1999; d) Special Private Account No. (SPAN) 858; e) Savings Account No. 0116-17345-9; f) Letter of authority dated November 23, 1999 re:SPAN 858; g) Letter of authority dated January 29, 2000 re: SPAN 858; h) Letter of authority dated April 24, 2000 re: SPAN 858; i) Urban Bank check no. 052092 dated April 24, 2000 for the amount of P36,572,315.43; j) Urban Bank check no. 052093 dated April 24, 2000 the amount of P107,191,780.85. According to the petitioner, the bank officials and personnel are criminally liable for releasing, without his knowledge, consent and authorization, information relative to his accounts to the prosecution. Further, since the information used to support the requests for the subpoenas was not secured by court order, such information was illegally acquired and the requests for subpoenas containing the said illegally acquired information are already a direct violation of RA 1405. Consequently, such illegally acquired information cannot be used in any proceeding. He invokes the constitutional provision on the right of the people to be secure in their persons, houses, papers and effects against unreasonable searches and seizures of whatever nature and purpose and that any evidence obtained in violation thereof shall be inadmissible in evidence. 16 The petitioner cites the following pronouncement of the Court in Marquez: Zones of privacy are recognized and protected in our laws. The Civil Code provides that "[e]very person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons" and punishes as actionable torts several acts for meddling and prying into the privacy of another. It also holds a public officer or employee or any private individual liable for damages for any violation of the rights and liberties of another person, and recognizes the privacy of letters and other private communication. The

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Revised Penal Code makes a crime of the violation of secrets by an officer, the revelation of trade and industrial secrets, and trespass to dwelling. Invasion of privacy is an offense in special laws like the Anti-Wiretapping Law, the Secrecy of Bank Deposits Act, and the Intellectual Property Code. 17 A review of the incidents related to the present case will show why the petitioners reliance on Marquez is misplaced. In the said case, the Office of the Ombudsman issued a subpoena addressed to Marquez, a bank officer of Union Bank, directing her to bring several bank documents for in camera inspection in connection with an investigation being conducted by the Office of the Ombudsman. Marquez refused to comply with the said directive and sought recourse to the Court by filing a petition and raising therein the issue of whether the order of the Office of the Ombudsman to have an in camera inspection of the questioned account was allowed as an exception to the law on secrecy of bank deposits. According to the Court, notwithstanding Section 15(8) 18 of RA 6770 (The Ombudsman Act), "before an in camera inspection may be allowed, there must be a pending case before a court of competent jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject matter of the pending case before the court of competent jurisdiction. The bank personnel and the account holder must be notified to be present during the inspection, and such inspection may cover only the account identified in the pending case." 19 Marquez was promulgated by the Court on June 27, 2001. However, as early as February 8, 2001 or before the promulgation of Marquez, the Office of the Ombudsman, relying on Section 15(8) of RA 6770 and on the basis of information obtained during the impeachment proceedings of former President Estrada, issued a subpoena addressed to Urban Bank. The documents sought under the subpoena pertained to numbered accounts 727, 737, 747, 757 and 858 allegedly in the names of Jose Velarde, Joseph E. Estrada, Laarni Enriquez, Guia Gomez, Joy Melendrez, Peachy Osorio, Rowena Lopez, Kevin or Kelvin Garcia. In compliance with the said subpoena, the PDIC, as then receiver of Urban Bank, issued a certification on February 13, 2001, as to the availability of bank documents relating to A/C 858 and T/A 858 and the non-availability of bank records as to the other accounts named in the subpoena. Based on the PDIC certification, the Office of the Ombudsman issued on February 16, 2001 another subpoena directing the production of documents pertinent to accounts A/C 858 and T/C 858. The PDIC again complied and furnished the Office of the Ombudsman on February 21, 2001 certified copies of the following documents: 1. Transaction registers dated 7-02-99, 8-16-99, 9-17-99, 10-18-99, 11-22-99,1-07-00, 01-17-00, 04-03-00 and 04-24-00; 2. Report of Unregularized TAFs & DTs For UR COIN A & B Placements of Various Branches as of February 29, 2000 and as of December 16, 1999; and 3. Trading Orders Nos. A No. 78102 and A No. 078125. Trading Order A No. 07125 is filed in two copies a white copy which showed "set up" information; and a yellow copy which showed "reversal" information. Both copies have been reproduced and are enclosed with this letter. We are continuing our search for other records and documents pertinent to your request and we will forward to you on Friday, 23 February 2001, such additional records and documents as we might find until then. (Attachment "4") 20 Upon the request of the Office of the Ombudsman, the PDIC furnished the said office copies of the managers checks. With respect to the other documents described by petitioner JV Ejercito as "extremely-detailed," the Special Prosecution Panel explains how they came to know about these documents in this manner: What is more, Attachment "2-a," the compliance letter from the PDIC, specifically mentioned, as among the documents transmitted thereby, a LIST (Attachment "2-B") pertaining to the documents available in connection with Account No. 858, which list and documents (listed therein) were furnished the Office of the Ombudsman: In compliance with the Subpoena Duces Tecum dated February 8, 2001 issued by the Office of the Ombudsman, transmitted are: 1. Certification on available bank documents relating to A/C 858 and T/A 858 contained in a list attached thereto xxx (emphasis supplied) There is a list, therefor, apart from the documents themselves (furnished the Office of the Ombudsman) to which said list is attached, from which details can be lifted. Thus, as to Trading Order No. 020385 dated January 29, 1999, it must be noted that it is the second item in the list (Attachment "2-b" hereof) under document no. A-2. It is also among the documents furnished by the PDIC. As to Confirmation Advice TA 858, it must be noted that this is a specific but not detailed document being sought in the subpoena regarding Account No. 858, in general. For those familiar with banking practice, such is an expected document of course, or one issued in the course of placements since it has been previously established that Account No. 858 is a Trust Account. A confirmation advice, therefore, is a reasonable and expected document to be found in trust accounts to evidence participation in specific amounts. A sample of said confirmation advice, in the amount of P200 Million, and which is among the documents officially furnished the Office of the Ombudsman during the investigation leading to the charge for plunder against former President Joseph Estrada, et al., is attached as Attachment "36."

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Further, the list (Attachment "2-b" hereof) enumerates a number of confirmation advices sufficient for the plaintiff to ask for the same in the instant subpoena. However, as earlier explained, even in the absence of such a list, any person could reasonably expect such a document in Trust Account No. 858 to evidence participation. As to the Trust Agreement dated January 1999, since the account had been established as a Trust Account, it is reasonable to presume and expect that there is such a Trust Agreement on or about January 1999, coinciding with the date of the Trading Order, existing in the records. Surely, this needs no stretch of imagination to reckon that such a document should exist in a truth account. As to Special Private Account No. (SPAN) 858, SPAN 858 is yet another detail derived from a study of the documents and list furnished by the PDIC to the Office of the Ombudsman. For example, document no. C-2 in the list would yield a Trading Order No. 046352 for P40 Million with the customer being identified as SPAN 858. As to Savings Account No. 0116-17345-9, again, among the documents furnished by the receiver of Urban Bank to the Office of the Ombudsman pursuant to its constitutional powers is a copy of the Specimen Signature Card for SPAN 858, opened on March 9, 1999 under Account No. 0116-17345-9. It must be emphasized that Account No. 0116-17345-9 is an entry in the said document. As to the Letter of Authority dated November 23, 1999 re: SPAN 858, it is document no. E-3 in the list. It must be emphasized that this letter of authority dated November 23, 1999 authorized the release of more than P100 Million worth of managers checks, where the ultimate recipient, for its deposit to the Jose Velarde account was, Baby Ortaliza. It must be recalled that prosecution witnesses Teresa Barcelona and Glyzelyn H. Bejec testified that it was Ortaliza who deposited the managers checks subject of the letter of authority dated November 23, 1999 to the Jose Velarde account via Equitable PCIBank Greenhills Branch. It must be recalled that plaintiff has presented voluminous evidence to establish beyond any doubt that Lucena "Baby" Ortaliza worked for accused Joseph Estrada in the Office of the Vice President, as testified to by prosecution witness Remedios Aguilar of the Office of the Vice President. The same fact is also shown by Exhibits "Y 5," "Z5," "A6" (Ortalizas appoint papers designating her as VicePresidential Staff Officer II signed by then Vice President Jose Estrada), "B6" (Certification of Employment), "C6" (Oath of Office), "D6" (Position Description Form), "E6" (Notice of Salary Adjustment) "F6" (Certification) and "G6" (Personal Data Sheet). Ortaliza also worked for accused Joseph Estrada at the Office of the President as testified to by witness Lita Sison of the Office of the President and as proved by Exhibits "I6" (Master Personnel Records File), "H6" (Registration letter of Ortaliza from the Office of the President), "J6" (Personnel Assessment Form), "K6" (appointment papers designating her as Presidential Staff Officer VI, Internal House, signed by then President Joseph Estrada), "L6" (Oath of Office), "M6" (Certification of Employment), "N6" (Position Description Form), "O6" (Personal Data Sheet) and "P6" (Ortalizas public service record). The same "Baby" Ortaliza also transacted on behalf of former President Joseph Estrada with respect to his personal bank accounts. Indeed, Baby Ortaliza, as testified to by numerous prosecution witnesses and as shown by the documents they identified, is also the same person who transacted with Equitable PCIBank in connection with the Jose Velarde account and with Citibank in connection with the conjugal bank account of former President Joseph Estrada and Sen. Luisa Ejercito wherein the P8 Million check of Gov. Luis "Chavit" Singson was deposited. In addition to the foregoing and the testimonies of Clarissa Ocampo and Manuel Curato of Equitable PCIBank, the documents relating to Trust Account No. 858, thus, constitute further proof that accused Joseph Estrada is Jose Velarde. Indeed, the surfacing of the name Baby Ortaliza in this Account No. 858 and her participation herein, coupled with the previous evidence presented as to who she worked for, all the more make Trust Account No. 858 not only relevant and material, but also the very subject matter of litigation in the instant case. Indeed, her participation herein more than establishes a pattern of behavior, a custom, a modus operandi among accused Joseph Estrada, herself and the other co-accused in appearing for, representing, accused Joseph Estrada and transacting with respect to his bank accounts. As to Letter of Authority dated January 17, 2000 re SPAN 858, it is document no. E-4 in the list. As to Letter of Authority dated April 24, 2000 re: SPAN 858, it is document no. E-5 in the list. As to Urban Bank Check No. 052093 dated April 24, 2000 in the amount of P36,572,315.43 and Urban Bank Check No. 052093 dated April 24, 2000 in the amount of P107,191,780.85, the foregoing details were culled from the contents of the letter of authority dated April 24, 2000. Indeed, said letter of authority authorizes the issuance of managers checks in accordance with the details therein provided: 1) AMOUNT :PHP107,191,780.85 DATE :APRIL 24, 2000 PAYEE :CASH MC # :052093 2) AMOUNT :PHP36,572,315.43 DATE :APRIL 24, 2000

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PAYEE :CASH MC# :052092 It must be emphasized that the foregoing details were adopted in seeking for the production of the two (2) Urban Bank managers checks. 21 As shown by the Special Prosecution Panel, some of the details about the accounts of petitioner JV Ejercito were obtained from various sources gathered during the impeachment proceedings against former President Estrada. The various sources included reports, articles and investigative journals, which are legitimate sources. The other details were gathered upon compliance by the PDIC and/or Urban Bank with the subpoenas issued by the Office of the Ombudsman prior to the promulgation by the Court of Marquez. The Office of the Ombudsman, in issuing the subpoenas relied on Section 15(8) of RA 6770 giving it the power "to issue subpoena and subpoena duces tecum and take testimony in any investigation or inquiry, including the power to examine and have access to bank accounts and records." The Marquez ruling, it bears reiterating, came after the subpoenas were issued by the Office of the Ombudsman and the PDIC and Urban Bank had already complied therewith by furnishing it the necessary information. The said information cannot thus be considered "illegal" because Marquez, which applied and interpreted the power of the Office of the Ombudsman under Section 15(8) of RA 6770, cannot be given retroactive application. In Filoteo, Jr. v. Sandiganbayan, 22 the Court emphasized that "judge-made" laws are to be applied prospectively: The prospective application of "judge-made" laws was underscored in Co v. Court of Appeals where the Court ruled thru Chief Justice Andres R. Narvasa that in accordance with Article 8 of the Civil Code which provides that "(j)udicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines," and Article 4 of the same Code which states that "(l)aws shall have no retroactive effect unless the contrary is provided," the principle of prospectivity of statutes, original or amendatory, shall apply to judicial decisions, which, although in themselves are not laws, are nevertheless evidence of what the law means. 23 Contrary to the petitioners contention, therefore, the "extremely-detailed" information of the Office of the Ombudsman on which it based its requests for subpoenae duces tecum/ad testificandum can hardly be characterized as "illegal." In any case, even if Marquez were to be given retroactive application, still, the crux of the Courts ruling in the said case has no application to the present case. In Marquez, the Court disallowed the Ombudsman from conducting an in camera inspection of the bank account because "there was no pending case in court which would warrant the opening of the bank account for inspection." On the other hand, it is indubitable that in the present case, the plunder and illegal use of alias cases against former President Estrada are pending before the Sandiganbayan and, unlike in Marquez, the Special Prosecution Panel has asked leave of court in accordance with RA 1405 for the production of the said documents. Consequently, the subpoenae duces tecum/ad testificandum issued by the Sandiganbayan are allowable exceptions to the bank secrecy laws as they properly fall under the following categories in Section 2 thereof: (5) Upon order of a competent court in cases of bribery or dereliction of duty of public officials; or (6) In cases where the money deposited or invested is the subject matter of litigation.
24

Finally, the petitioner has sought to suppress the "extremely-detailed" information that the Special Prosecution Panel has requested. He invokes his constitutional right against unreasonable search and seizures and that any evidence obtained in violation thereof shall be inadmissible in evidence. In her concurring and dissenting opinion, Mme. Justice Angelina Sandoval-Gutierrez agrees with petitioner JV Ejercito as she supports his plea to quash the subpoenae duces tecum/ad testificandum issued by the Sandiganbayan characterizing them as "unreasonable and oppressive" for being based on information allegedly obtained in violation of his constitutional right to privacy. To my mind, the application of the exclusionary rule or the "fruit of the poisonous tree" doctrine is not warranted in the present case not only because, as discussed earlier, there is no "illegally obtained evidence" to speak of but also because nowhere is it stated in RA 1405, and even in Marquez, that a violation thereof warrants application of the exclusionary rule. Section 5 of RA 1405 provides that "[a]ny violation of this law will subject the offender upon conviction, to an imprisonment of not more than five years or a fine of not more than twenty thousand pesos or both, in the discretion of the court." Interestingly, the United States has the Bank Secrecy Act (BSA). 25 However, unlike RA 1405, the US BSA was precisely enacted by the US Congress as a means of providing federal law investigators with an effective tool to fight criminal financial activity: The conclusion reached by Congress in the early hearings was summarized by Robert Morgenthau, U.S. Attorney, Southern District of New York, "Secret numbered foreign bank accounts have become an ever increasing widespread and versatile tool for the evasion of our laws and regulations and for the commission of crimes by American citizens and for hiding the fruits of crimes already committed. This wave of criminal activity is fostered by the failure of fairly complete criminal investigations to ripen into prosecutions because there has been no disclosure of the real parties in interest; investigators cannot point to any particular individual. Even if identity is revealed, the evidence remains inadmissible hearsay. Most modern secrecy law prohibits the banker from coming forth with the

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disclosure. Thus, the prosecution lacks the competent and qualified business representative who could state evidence of account information as a business records exception to the hearsay rule. In response to the public outcry over this reported criminal activity and as a means of providing federal law investigators with an effective investigative tool, Congress enacted the Bank Secrecy Act (BSA). 26 The important feature of the BSA is its regulatory structure that is designed to be used as an investigative tool in the fight against white collar crime, and its passage is a broad delegation of commerce power to the Treasury Department. Title I thereof authorizes the Secretary of the Treasury Department to require financial institutions to record vast amounts of information on financial transactions. Title II provides a regulatory access to information via required reporting by the financial institutions and expressly authorized governmental interagency exchange of the accessed information. 27 In California Bankers Association v. Schulz, 28 the US Supreme Court held that the BSA is a constitutionally valid and proper regulatory device. In United States v. Miller, 29 the US Supreme Court reaffirmed its stance by holding that government access to a customer account records is not an unreasonable search and seizure even if realized through defective legal process and without customer notification. Miller was convicted of operating an illegal still, functioning as a distiller without having posted bond, and committing tax evasion. The convictions were based on evidence subpoenaed pursuant to the BSA. Miller moved to suppress the bank records on the grounds that they were obtained by means of a defective subpoena duces tecum which resulted in a seizure violative of the fourth amendment. The US Supreme Court held that Miller had no "protectable" fourth amendment interest in the subpoenaed documents. Justice Powell, speaking for the US Supreme Court, reasoned that the subpoenaed documents were not Millers "private papers" and that he could assert neither ownership nor possession. Rather, these were the business records of the bank. The said Court also debunked Millers claim that he had a legitimate "expectation of privacy" concerning the contents of the bank documents, e.g., checks and deposit slips: Even if we direct our attention to the original checks and deposit slips, rather than to the microfilm copies actually viewed and obtained by means of the subpoena, we perceive no legitimate "expectation of privacy" in their contents. The checks are not confidential communications but negotiable instruments to be used in commercial transactions. All of the documents obtained, including financial statements and deposit slips, contain only information voluntarily conveyed to the banks and exposed to their employees in the ordinary course of business. The lack of any legitimate expectation of privacy concerning the information kept in bank records was assumed by Congress in enacting the Bank Secrecy Act, the express purpose of which is to require records to be maintained because they "have a high degree of usefulness in criminal tax, and regulatory investigations and proceedings." The depositor takes the risk, in revealing his affairs to another, that the information will be conveyed by that person to the Government. The Court has held repeatedly that the Fourth Amendment does not prohibit the obtaining of information revealed to a third party and conveyed by him to Government authorities, even if the information is revealed on the assumption that it will be used only for a limited purpose and the confidence placed in the third party will not be betrayed. 30 Because the customer had no "protectable" fourth amendment rights, according to the US Supreme Court, the case was controlled by the general rule that a subpoena issued to a third party, for that partys records, does not violate the rights of the third partys client. Largely in response to Miller and California Bankers, the US Congress enacted the Right to Financial Privacy Act of 1978 (RFPA). 31 It enumerates the legal processes available for federal agency access to customers account information. Access is conditioned upon one of the following procedures: customer authorization, 32 administrative subpoena or summons, 33 search warrant, 34 judicial subpoena, 35 grand jury subpoena, 36 or formal written agency request. 37 Case law provides, however, that a violation of the procedures set forth in RFPA does not warrant exclusion of the evidence obtained because courts should not imply a suppression remedy unless the statute expressly refers to the exclusionary rule. The RFPA states that civil penalties are the only authorized remedy for its violation. 38 In United States v. Frazin, 39 for example, Frazin and Miller were charged with mail and wire fraud. During its investigation, banks furnished the Federal Bureau of Investigation (FBI) information about the account of Frazin without his knowledge or consent and without warrant. Frazin sought to suppress the bank records and other information obtained in violation of RFPA. The United States Court of Appeals, Ninth Circuit, held against Frazin ratiocinating that had Congress intended to authorize a suppression remedy, it surely would have included it among the remedies it expressly authorized. The said US appellate court likewise refused to suppress the financial evidence pursuant to its supervisory powers over the administration of justice. It opined that "because the statute, when properly construed, excludes a suppression remedy, it would not be appropriate for us to provide one in the exercise of our supervisory powers over the administration of justice. Where Congress has both established a right and provided exclusive remedies for its violation, we would encroach upon the prerogatives of Congress where we to authorize a remedy not provided for by the statute." The said ruling in Frazin was reiterated by the US Court of Appeals, Second Circuit, in United States v. Daccarett, 40 a civil forfeiture proceeding instituted by the United States Government against monies of Cali cartel, a Colombian conglomerate headed by Jose Santacruz-Londono, which allegedly imported 3000 kilograms of cocaine a month into the US. The cartel allegedly used bank accounts throughout the US, Europe, Central and South America to store and move its narcotic proceeds. Funds were moved through various international banks by means of electronic fund transfers for ultimate deposit into Colombian bank accounts.

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Several associates of Santacruz-Londono were arrested in Luxembourg. Anticipating that the arrests would trigger an effort by the cartel to move its monies to Colombia, the Luxembourg law enforcement authorities requested the assistance of several countries to freeze monies related to the cartel. The US Drug Enforcement Agency (DEA) instructed intermediary banks in New York to attach "all funds" on deposit in the names of entities and individuals connected with Santacruz-Londono. The DEA also subpoenaed from the intermediary banks financial records of related accounts. The entities and individuals who claimed to be the beneficiaries of the seized funds argued, among others, that their fourth amendment rights against unreasonable searches and seizures were violated when the government gained access to their financial records from the intermediary banks without a warrant. They contended that evidence obtained from the subpoenas should have been suppressed at trial. The US appellate court, in rejecting this argument, cited Frazin and succinctly held that "because the RFPA states that civil penalties are the only authorized remedy for its violation, it would be inappropriate for the courts to imply a suppression remedy as well." Also in United States v. Thompson,
41

the US Court of Appeals, Eleventh Circuit, made the following disquisition:

x x x [T]he defendant would have to show that Congress had provided such a remedy for a violation of the statute, either specifically or by inference. Clearly Congress intended to place limits on the Governments ability to monitor the private activities of individuals when it passed this statute. Congress did not, however, suggest that any information obtained in violation of the statutes provisions should be excluded. Instead the statute only provides for fines and possible imprisonment for knowing violations. When Congress specifically designates a remedy for one of its acts, courts generally presume that it engaged in the necessary balancing of interests in determining what the appropriate penalty should be. Absent a specific reference to the exclusionary rule, it is not appropriate for the courts to read such a provision into the act. 42 Under prevailing jurisprudence in the United States therefore, violations of the RFPA do not warrant the application of the exclusionary rule with respect to the evidence obtained. Nonetheless, in the present case, there is no violation of RA 1405 precisely because petitioner JV Ejercitos case properly falls under the recognized exceptions to the rule on confidentiality of bank deposits. Further, the Special Prosecution Panel has properly requested the Sandiganbayan for the issuance of the subpoenae duces tecum/ad testificandum for the production of documents relating to the bank accounts of petitioner JV Ejercito in connection with the plunder and illegal use of alias cases against former President Estrada. The Sandiganbayan, in issuing the assailed resolutions, clearly committed no grave abuse of discretion. ACCORDINGLY, I vote to DISMISS the petition.
ROMEO J. CALLEJO, SR.

Associate Justice

DISSENTING OPINION

SANDOVAL-GUTIERREZ, J.:

I regret I cannot give my assent to the ponencia of Madame Justice Conchita Carpio Morales. To my mind, no member of a democratic society can honestly argue that there is nothing wrong in an examination of a bank account to the complete ignorance of its holder. This is the kind of conduct referred to in Rochin v. California, 1 as one that "shocks the conscience," "one that is bound to offend hardened sensibilities." This abusive conduct must be stricken if we are to maintain decency, fair play, and fairness in our judicial system. Nothing can destroy a government more quickly than its failure to observe its own laws, its disregard of the character of its own existence. The government should not demean but protect the Bill of Rights, because the highest function of authority is to exalt liberty. Here, petitioner Joseph Victor G. Ejercitos right to privacy has been violated. I cannot, in my conscience, tolerate such violation. Zones of privacy are recognized and protected by our laws. 2 Within these zones, any form of intrusion is impermissible unless excused by law and in accordance with customary legal process. The meticulous regard this Court accord to these zones arises not only from the conviction that the right to privacy is a "constitutional right" and "the right most valued by civilized men," 3 but also from our adherence to the Universal Declaration of Human Rights which mandates that "no one shall be subjected to arbitrary interference with his privacy" and "everyone has the right to the protection of the law against such interference or attacks." 4 For easy reference, a narration of the factual and legal antecedents is imperative. This petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, seeks to annul and set aside Sandiganbayan (a) Resolutions, dated February 7 5 and February 12, 2003, 6 denying Joseph Victor G. Ejercitos two succeeding motions to quash three (3) subpoenae duces tecum/ad testificandum; and (b) Resolution dated March 11, 2003 7 denying his motion for reconsideration all issued in Criminal Case No. 26558 for plunder against former President Joseph Ejercito Estrada, et al. Joseph Victor G. Ejercito (petitioner herein) is the holder of two (2) bank accounts with the Urban Bank and Urbancorp Investment, Inc., now Export and Industry Bank (EIB); one is Trust Account No. 858 and the other is Savings Account No. 0116-17345-9. On January 26, 2003, petitioner learned from the media that the Special Prosecution Panel in Criminal Case No. 26558, 8 entitled "People vs. Joseph Ejercito Estrada, et al." for plunder, pending before the Sandiganbayan (respondent herein), had requested the

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said court to issue subpoenae duces tecum/ad testificandum to the EIB for the production and examination of his two (2) bank accounts. Alarmed, petitioner attended the hearing of the plunder case set the next day and submitted to respondent Sandiganbayan a letter expressing his deep concern on his bank accounts being the subject of a "subpoena duces tecum/ad testificandum." He also requested that he be given time to retain the services of a lawyer, thus: "Your Honors: It is with much respect that I write this court relative to the concern of subpoenaing the undersigneds bank account which I have learned through the media. I am sure the prosecution is aware of our banking secrecy laws everyone supposed to observe. But, instead of prosecuting those who may have breached such laws, it seems it is even going to use supposed evidence which I have reason to believe could only have been illegally obtained. The prosecution was not content with a general request. It even lists and identifies specific documents meaning someone else in the bank illegally released confidential information. If this can be done to me, it can happen to anyone. Not that anything can still shock our family. Nor that I have anything to hide. Your Honors. But, I am not a lawyer and need time to consult one on a situation that affects every bank depositor in the country and should interest the bank itself, the Bangko Sentral ng Pilipinas, and maybe the Ombudsman himself, who may want to investigate, not exploit, the serious breach that can only harm the economy, a consequence that may have been overlooked. There appears to have been deplorable connivance xxxxxx I hope and pray, Your Honors, that I will be given time to retain the services of a lawyer to help me protect my rights and those of every banking depositor. But the one I have in mind is out of the country right now. May I, therefore, ask your Honors, that in the meantime, the issuance of the subpoena be held in abeyance for at least ten (10) days to enable me to take appropriate legal steps in connection with the prosecutions request for the issuance of subpoena concerning my accounts." 9 (Emphasis supplied) To petitioners surprise, respondent Sandiganbayan advised him "to file a motion to quash" not later than 12:00 noon of January 28, 2003, or the following day. It dawned upon petitioner that respondent court had already issued a "subpoena duces tecum/ad testificandum." Upon verification of the records, petitioner found that the Special Prosecution Panel had filed with respondent Sandiganbayan two (2) requests for the issuance of subpoenae duces tecum/ad testificandum, one dated January 20 10 and the other January 23, 11 2003 for the EIB President or his authorized representative to appear and testify on certain dates and to bring the original or certified true copies of the following documents: I. For Trust Account No. 858: 1. Account Opening Documents; 2. Trading Order No. 020385, dated January 29, 1999; 3. Confirmation Advice TA 858; 4. Original/Microfilm copies, including the dorsal side of the following: a) Bank of Commerce MC#0256254 in the amount of P2,000,000.00; b) Urban Bank Corp. MC# 34181 dated November 8, 1999 in the amount of P10,875,749.43; c) Urban Bank MC# 34182 dated November 8, 1999 in the amount of P42,716,554.22; d) Urban Bank Corp. MC#37661 dated November 23, 1999 in the amount of P54,161,496.52; 5. Trust Agreement dated January 1999;

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Trustee: Joseph Victor G. Ejercito Nominee: URBAN BANK-TRUST DEPARTMENT Special Private Account No. (SPAN) 858; and 6. Ledger of the Span #858 II. For Savings Account No. 0116-17345-9 SPAN # 858 1. Signature Cards; and 2. Statement of Account/Ledger III. Urban Bank Managers Checks and their corresponding Urban Bank Managers Checks Application Form, as follows: 1. MC # 039975 dated January 18, 2000 in the amount of P70,000,000.00; 2. MC # 039976 dated January 18, 2000 in the amount of P2,000,000.00; 3. MC # 039977 dated January 18, 2000 in the amount of P2,000,000.00; and 4. MC# 039978 dated January 18, 2000 in the amount of P1,000,000.00; Petitioner also came to know that respondent court had granted both requests tecum/ad testificandum dated January 21 13 and 24, 14 2003.
12

and issued the corresponding subpoenae duces

Immediately, or on January 29, 2003, petitioner filed a motion to quash the two (2) subpoenae. 15 Meanwhile, on January 31, 2003, the Special Prosecution Panel filed another request for the issuance of a subpoena duces tecum/ad testificandum pertaining to the same documents. 16 On the same day, respondent Sandiganbayan granted the request and issued the corresponding subpoena. Again, petitioner filed a motion to quash. 17 In both motions to quash, petitioner bewailed the "extremely-detailed" information contained in the Special Prosecution Panels requests, alleging that a prior illegal disclosure of his bank accounts took place. During the exchange of pleadings, petitioner learned that there was indeed a prior disclosure of his bank accounts. In fact, as early as February 8, 2001, the Office of the Ombudsman had issued a subpoena duces tecum addressed to the "President or Chief Executive Officer of Urban Bank" requiring him to produce "bank records and all documents relative thereto pertaining to all bank accounts (Savings, Current, Time Deposit, Trust, Foreign Currency Deposits, etc) under the account names of Jose Velarde, Joseph E. Estrada, Laarni Enriquez, Guia Gomez, Joy Melendrez, Peachy Osorio, Rowena Lopez, Kevin or Kelvin Garcia, 727, 737, 747, 757 and 858." 18 On February 13, 2001, the Philippine Deposit Insurance Corporation (PDIC), as receiver of Urban Bank, responded to the subpoena and certified the availability of bank documents relating to "T/A 858 and A/C 858" and the non-availability of bank records as to the other accounts, thus: We certify that from the gathering and research we have conducted to date into the records of the closed Urban Bank under the custody and control of the Philippine Deposit Insurance Corporation (PDIC), as Receiver of said bank, the documents enumerated in the attached list refer to "A/C 858" and "T/A 858." We further certify that Accounts "A/C 858" and "T/A 858" do not appear in the Registry of Deposits of Urban Bank and therefore said accounts are not part of the deposit liabilities of said bank. 19 Based on the foregoing certification, the Office of the Ombudsman again issued a subpoena duces tecum dated February 16, 2001 directing the production of documents pertinent to accounts "T/C 858 and A/C 858." 20 In compliance, the PDIC furnished the Office of the Ombudsman certified copies of the following documents: 1. Transaction registers dated 7-02-99, 8-16-99, 9-17-99, 10-18-99, 11-22-99, 1-07-00, 01-17-00, 04-03-00 and 04-24-00; 2. Report of Unregularized TAF & DTS For UR COIN A & B Placements of Various Branches as of February 29, 2000 and as of December 16, 1999; and

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3. Trading Orders Nos. A No. 78102 and A No. 078125. Trading Order A No. 07125 is filed in two copies a white copy which showed "set up" information; and a yellow copy which showed "reversal" information. Both copies have been reproduced and are enclosed with this letter. 21 The Office of the Ombudsman, in another subpoena duces tecum Managers/Cashiers Checks in the following amounts: a. P10,875,749.43 dated November 8, 1999 b. P 2,000,000.00 dated January 18, 2000 c. P 2,000,000.00 dated January 18, 2000 d. P 1,000,000.00 dated January 18, 2000 e. P70,000,000.00 dated January 18, 2000 23 The PDIC complied with the said subpoena. On the basis of the foregoing documents released by the PDIC to the Office of the Ombudsman, the Special Prosecution Panel filed with respondent Sandiganbayan its own requests for the issuance of subpoenae duces tecum/ad testificandum. On February 7, 2003, respondent Sandiganbayan denied petitioners motion to quash subpoenae duces tecum/ad testificandum dated January 21 and 24, 2003. 24 Thus: "At the threshold, we state that we are not in accord with the stand of the prosecution that a trust account is not included in the term "deposit of whatever nature." A "bank deposit" is defined as a contractual relationship ensuing from the delivery, by one known as the depositor of money, funds or even things into the possession of the bank, which receives the same upon the agreement to pay, repay or return, upon the order or demand of the depositor, the money, funds, or equivalent amount. This agreement on the part of the bank is usually a tacit one and implied, and it may include an implied promise to pay interest upon the deposit, depending upon the nature of the deposit and the account into which it is placed (10 Am Jur 2d Banks 337, cited in page 121, Ballentines Law Dictionary, Third Edition). x x x The Court is inclined to adopt the broader or expanded definition of the word "deposit" in R.A. 1405 as to encompass trust accounts consistently with the state policy declared in Section 1 thereof which is "to give encouragement to the people to deposit their money in banking institution and to discourage private hoarding so that the same may be properly utilized by banks in authorized loans to assist in the economic development of the country." In fact, the law itself adverts to "deposit of whatever nature." xxxxxx The Bank Secrecy Laws which prohibit the disclosure of or inquiry into deposits with any banking institution provides for exceptions as follows: xxxxxx 3. Upon order of a competent court in cases of (a) bribery or dereliction of duty or (b) where the money deposited or invested is the subject matter of litigation; xxxxxx We now agree with the prosecution that the issuance of the subpoena to Export and Industry bank (formerly Urban Bank) and PDIC falls under the exception. The questioned subpoena was issued by this Court in relation to the instant cases against former President Joseph Estrada for Plunder and Illegal Use of Alias. The case for plunder which involves betrayal of public trust, undeniably, is analogous to the cases enumerated by law for the exception to apply. As expressed by the Supreme Court in the cases of Philippine National Bank v. Gancayco (ibid) and Philippine National Bank v. Dionisio (9 SCRA 10), "cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason is seen why these two classes of cases cannot be excepted from the rule making bank deposits confidential. The policy as to one cannot be different as to the other. This policy expresses the notion that a public office is a public trust and any person who enters upon its discharge does so with the full knowledge that his life, so far as relevant to his duty, is open to public scrutiny." x x x xxxxxx Further, movants claim that the subpoena must be quashed in view of the apparent conspiracy between the prosecution panel, officials of Export and Industry Bank, and Ms. Aurora Baldoz of the Philippine Deposit Insurance Corporation as revealed by the fact that the prosecution panel knows the documents which are supposedly very internal to the bank and its clients, deserves scant consideration. Aside from it being not recognized as one of the grounds to quash the subpoena, the mere fact that the request for subpoena specified the documents which are to be brought to court, cannot, by itself proved that there was conspiracy on the part of
22

dated March 7, 2001, directed the production of

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the prosecution, the officials of Export and Industry Bank as well as of the officials of the PDIC to violate the bank secrecy law. As clarified by the prosecution, the documents listed in the request were obtained in February, 2001, pursuant to the power conferred on the Ombudsman under Section 15 (8) of R.A. 6770, long before the Supreme Court promulgated the Marquez v. Desierto case. Conspicuously, since the investigation was conducted in February, 2001, these cases are already pending, hence, the Marquez ruling will not likewise apply. Besides, as already discussed, we declare that this case falls under the exception of the aforecited law, hence, the premise on which this argument proceeds, does not any more exist. xxxxxx x x x The allegation that movants constitutional right to due process was violated by the failure of the prosecution to give notice to him and accused Estrada is devoid of merit. In the case of Adorio v. Bersamin (273 SCRA 217), the Supreme Court ruled that: Contrary to petitioners allegations, there was nothing irregular in the issuance of the subpoenas duces tecum. Requests by a party for the issuance of subpoenas do not require notice to other parties to the action. No violation of due process results by such lack of notice since the other parties would have ample opportunity to examine the witnesses and documents subpoenaed once they are presented in court." On February 12, 2003, respondent Sandiganbayan likewise denied petitioners motion to quash subpoena duces tecum/ad testificandum dated January 31, 2003. Petitioner filed a motion for reconsideration but was denied in the Resolution dated March 11, 2003. Hence, the present petition for certiorari anchored on the following arguments: (1) Whether the inquiry by subpoenae into the bank accounts of petitioner falls under the exceptions provided for by R.A. No. 1405; and (2) Whether petitioner should have been notified by respondent court, by furnishing him copies of the subpoenae, that his bank accounts are subject of the litigation therein. Petitioner maintains that the inquiry into his bank accounts does not fall under the exceptions provided by Republic Act No. 1405 (Secrecy of Bank Deposits Act), i.e., "upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of litigation." He stresses that plunder is neither bribery nor dereliction of duty and that his bank accounts are not the "subject matter" 25 of the plunder case. In this regard, he contends that the rulings of this Court in Philippine National Bank v. Gancayco 26 and Banco Filipino Savings and Mortgage Bank v. Purisima 27 are not applicable to the instant case. Finally, he insists that the "extremely-detailed" information in the Special Prosecution Panels requests for subpoenae duces tecum/ad testificandum shows prior illegal disclosure of his bank accounts, in violation of his constitutional right to due process and privacy. On the other hand, respondent People contends that petitioners bank deposits are actually proceeds of a "trust account," hence, subject of inquiry under R.A. No. 1405. I find the petition impressed with merit. The case at bar brings to fore R.A. No. 1405 or the Secrecy of Bank Deposits Act. A glimpse at its history provides an adequate backdrop for our ensuing discussion. On September 9, 1955, the Philippine Legislature enacted R.A. No. 1405. Its rationale is to discourage private hoarding and encourage people to deposit money in banks to be utilized in authorized loans. It happened that after World War II, capital and credit facilities for agricultural and industrial development in the country were lacking. Rehabilitation of the banking system became a major government thrust. However, private hoarding of money was rampant because people feared government inquiry into their bank deposits and bond investments for tax collection purposes. Thus, even if the members of Congress at that time recognized the possible danger of R.A. No. 1405, such as providing a climate conducive to tax evasion, still, they passed the law with the belief that the benefits accruing to the economy with the influx of deposits and bond investments would counterbalance immeasurably the losses of the Government from such tax evasion. 28 Section 2, the core of R.A. No. 1405, then reads: Sec. 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation. In 1981, Former President Ferdinand E. Marcos issued Presidential Decree (P.D.) No. 1792 to provide for additional exceptions to the "absolutely confidential nature" of bank deposits. These additional exceptions are: (1) when the examination is made in the course of a special or general examination of a bank; or (2) when the examination is made by an independent auditor hired by the bank to conduct its regular audit. Section 2 of R.A. No. 1405, as amended, thus reads:

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SEC.2 All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except, when the examination is made in the course of a special or general examination of a bank and is specifically authorized by the Monetary Board after being satisfied that there is reasonable ground to believe that a bank fraud or serious irregularity has been or is being committed and that it is necessary to look into the deposit to establish such fraud or irregularity, or when the examination is made by an independent auditor hired by the bank to conduct its regular audit provided that the examination is for audit purposes only and the results thereof shall be for the exclusive use of the bank, or upon written permission of the depositor, or in case of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of litigation. (Emphasis supplied) The foregoing amendment was premised on the realization that the old provision adversely limited the examining authority of the Central Bank. Allegedly, such limitation was contrary to the effective supervision of banks and endangered the safety of deposits. However, in 1992, P.D. No. 1792 was expressly repealed by Republic Act (R.A.) No. 7653, otherwise known as the New Central Bank Act. 29 Aside from encouraging domestic savings, R.A. No. 7653 sought to uphold the right of citizens to privacy. Also, the then members of Congress were of the consensus that relaxed disclosure rules are not conducive to healthy competition among banks and other financial institutions. 30 Thus, we go back to the original provision of Section 2 of R.A. No. 1405 allowing deposits to be "examined, inquired or looked into" under the following exceptions: (1) upon written permission of the depositor; (2) in cases of impeachment; (3) upon order of a competent court in cases of bribery or dereliction of duty of public officials; or (4) in cases where the money deposited or invested is the subject matter of the litigation. I shall now resolve both issues. Inquiry Falls Under the Exceptions to the Confidentiality Rule and, therefore, may be Inquired into by Respondent Sandiganbayan. Petitioner contends that plunder is neither bribery nor dereliction of duty, hence, the inquiry on his bank accounts cannot be considered an exception under R.A. No. 1405. The argument is utterly without merit. In the 1965 Philippine National Bank v. Gancayco 32 case, this Court held for the first time that the exception "upon order of a competent court in cases of bribery or dereliction of duty of public officials" is not exclusive, and that analogous cases may be considered as falling within the same exception. There, "cases of unexplained wealth" were considered analogous to "cases of bribery or dereliction of duty." The Courts instructive pronouncement is quoted hereunder: "With regard to the claim that disclosure would be contrary to the policy making bank deposits confidential, it is enough to point out that while section 2 of Republic Act 1405 declares bank deposits to be "absolutely confidential," it nevertheless allows such disclosure in the following instances: (1) Upon written permission of the depositor; (2) In cases of impeachment; (3) Upon order of a competent court in cases of bribery or dereliction of duty of public officials; (4) In cases where the money deposited is the subject matter of the litigation. Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason is seen why these two classes of cases cannot be excepted from the rule making bank deposits confidential. The policy as to one cannot be different from the policy as to the other. This policy expresses the notion that a public office is a public trust and any person who enters upon its discharge does so with the full knowledge that his life, so far as relevant to his duty, is open to public scrutiny. Twenty-three (23) years thereafter, in 1988, the Court echoed the same principle in the Banco Filipino Savings and Mortgage Bank v. Purisima. 33 Incidentally, both cases involve Republic Act No. 3019, the Anti-Graft and Corrupt Practices Act. Today, this Court is faced with this important query is plunder analogous to bribery, dereliction of duty or cases of unexplained wealth? I need not indulge in a lengthy disquisition to show that plunder belongs to the same genre of cases. Under Republic Act No. 7080, An Act Penalizing the Crime of Plunder, this crime is committed by a public officer who, by himself or in connivance with others, amasses, accumulates or acquires ill-gotten wealth, the aggregate amount or total value of which is at least Fifty Million Pesos (P50,000,000.00), through a combination or series of overt or criminal acts. The essence of plunder lies in the phrase "combination or series of overt or criminal acts." Bribery and violations of R.A. No. 3019 are only some of the criminal acts that comprise the more serious crime of plunder. In other words, these are some of the predicate crimes of plunder. 34 All the criminal acts are enumerated hereunder: (1) Through misappropriation, conversion, misuse, or malversation of public funds or raids on the public treasury;
31

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(2) By receiving, directly or indirectly, any commission, gift, share, percentage, kickbacks, or any other form of pecuniary benefit from any person and/or entity in connection with any government contract or project or by reason of the office or position of the public officer concerned; (3) By the illegal or fraudulent conveyance or disposition of assets belonging to the National Government or any of its subdivision, agencies or instrumentalities or governmentowned or controlled corporations and their subsidiaries; (4) By obtaining, receiving or accepting directly, or indirectly any shares of stock, equity or any other form of interest or participation including the promise of future employment in any business enterprise or undertaking; (5) By establishing agricultural, industrial or commercial monopolies or other combinations and/or implementation of decrees and orders intended to benefit particular person or special interests; or (6) By taking undue advantage of official position, authority, relationship, connection, or influence to unjustly enrich himself or themselves at the expense and to the damage and prejudice of the Filipino people and the Republic of the Philippines. A reading of the provisions of the Revised Penal Code concerning bribery 35 and dereliction of duty, 36 as well as corrupt practices under R.A. 3019, readily shows the striking resemblance between them and the predicate crimes of plunder. Paragraph 2 actually constitutes indirect bribery while paragraphs 4 and 5 constitute corrupt practices under R.A. No. 3019. 37 Logically, if the criminal acts that make up the crime of plunder are categorized as exceptions to the confidentiality rule, with more reason that the more serious crime of plunder should be considered as falling within the same exception. All involve dishonesty and lack of integrity in public service. There is no reason why plunder should be treated differently. Petitioner now avers that this Courts rulings in Philippine National Bank and Banco Filipino do not apply to the present case because the subpoenae duces tecum/ad testificandum in said cases were issued prior to the amendment of Section 8, R.A. No. 3019. He stresses that under the old provision, the properties that may be considered, when a public officials acquisition of properties through legitimate means cannot be satisfactory shown, are only those of his "spouse and unmarried children." 38 However, under the new provision, the phrase "spouse and unmarried children" was changed to "spouse and dependents." 39 Thus, he contends that while he is a "son" of the accused in the plunder case, he is not his "dependent." 40 Petitioners argument lacks merit. The amendment of Section 8 could not have the effect of limiting the governments inquiry only to the properties of the "spouse and dependents" of a public official. This is in light of this Courts broad pronouncement in Banco Filipino that the inquiry extends to "any other persons," and that "restricting the inquiry only to property held by or in the name of the government official or employee, or his spouse and unmarried children" is "unwarranted" and "an absurdity that we cannot ascribe to our lawmakers." Thus: The inquiry into legally acquired property or property NOT "legitimately acquired" extends to cases where such property is concealed by being held by or recorded in the name of other persons. This proposition is made clear by R.A. No. 3019 41 which quite categorically states that the term, legitimately acquired property of a public office or employee shall not include x x x property unlawfully acquired by the respondent, but its ownership is concealed by its being recorded in the name of, or held by, respondents spouse, ascendants, descendants, relatives or any other persons. To sustain the petitioners theory, and restrict the inquiry only to property held by or in the name of the government official or employee, or his spouse and unmarried children is unwarranted in the light of the provisions of the statutes in question, and would make available to persons in government who illegally acquire property an easy and fool-proof means of evading investigation and prosecution; all they would have to do would be to simply place the property in the possession or name of persons other than their spouse and unmarried children. This is an absurdity that we will not ascribe to the lawmakers. Undoubtedly, the policy enunciated is to prevent a public official from evading prosecution or investigation by allowing government inquiry even to properties in the name of his "spouse, ascendants, descendants, relatives or any other persons." The Courts pronouncement renders insignificant the personal circumstance of the public officials child, i.e. whether he is a dependent or independent, married or unmarried. This is entirely logical. Section 8 itself starts with the statement: "If in accord with the provisions of Republic Act numbered One thousand three hundred seventynine, a public official has been found to have acquired during his incumbency, whether in his name or in the name of other persons, an amount of property and/or money manifestly out of proportion to his salary and to his other lawful income, that fact shall be a ground for dismissal or removal." Likewise, Republic Act No. 1379, 42 excludes the following properties from the definition of "other legitimately acquired property:" "1. Property unlawfully acquired by the respondent, but its ownership is concealed by its being recorded in the name of, or held by, the respondents spouse, ascendants, descendants, relatives or any other person. 3. Property unlawfully acquired by the respondent, but transferred by him to another person or persons on or after the effectivity of this Act." How can the government establish the nexus between a public official and his property in the name of other persons if this Court will limit the inquiry only to his "spouse and dependents"? Indeed, there is truth in respondent Peoples statement that "the extension of inquiry into property held by, or in the name of another persons other than the public official, is sustained by a recognized legislative and public policy adhered to by the courts."

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Accordingly, the fact that petitioner is not an accused in the plunder case does not insulate his bank accounts from inquiry. Such inquiry is justified by the fact that the Special Prosecution Panel is establishing a nexus between his bank accounts and their alleged owner, Former President Estrada, an accused in the plunder case. Furthermore, as pointed out by respondent Sandiganbayan, there is nothing in the exception "upon order or a competent court in cases of bribery or dereliction of duty of public officials" "which would suggest that in order for the exception to apply, the owner of the deposit or of the account must be an accused in the case where the information relative to the account is sought to be adduced." Petitioner also contends that the money deposited in his bank accounts cannot be considered the "subject matter" of the plunder case. I am not persuaded. The "subject matter of litigation" as used in R.A. No. 1405 is expounded in Union Bank of the Philippines v. Court of Appeals, the Court held:
43

where

"Union Bank is now before this Court insisting that the money deposited in Account No. 0111-01854-8 is the subject matter of the litigation. Petitioner cites the case of Mathay vs. Consolidated Bank and Trust Company, where we defined subject matter of the action," thus: By the phrase subject matter of the action is meant the physical facts, the things real or personal, the money, lands, chattels, and the like, in relation to which the suit is prosecuted, and not the delict or wrong committed by the defendant." Petitioner contends that the Court of Appeals confuses the cause of action with the subject of the action. In Yusingco v. Ong Hing Lian, petitioner points out, this Court distinguished the two concepts. x x x "The cause of action is the legal wrong threatened or committed, while the object of the action is to prevent or redress the wrong by obtaining some legal relief; but the subject of the action is neither of these since it is not the wrong or the relief demanded, the subject of the action is the matter or thing with respect to which the controversy has arisen, concerning which the wrong has been done, and this ordinarily is the property, or the contract and its subject matter, or the thing in dispute." The argument is well-taken. We note with approval the difference between the subject of the action from the cause of action. We also find petitioners definition of the phrase "subject matter of the action" is consistent with the term subject matter of the litigation, as the latter is used in the Bank Deposits Secrecy Act. In Mellon Bank, N.A. v. Magsino, where the petitioner bank inadvertently caused the transfer of the amount of US$1,000,000.00 instead of only US$1,000.00, the Court sanctioned the examination of the bank accounts where part of the money was subsequently caused to be deposited: x x x Section 2 of [Republic Act No. 1405] allows the disclosure of bank deposits in cases where the money deposited is the subject matter of the litigation. Inasmuch as Civil Case No. 26899 is aimed at recovering the amount converted by the Javiers for their own benefit, necessarily, an inquiry into the whereabouts of the illegally acquired amount extends to whatever is concealed by being held or recorded in the name of persons other than the one responsible for the illegal acquisition. Clearly, Mellon Bank involved a case where the money deposited was the subject matter of the litigation since the money so deposited was the very thing in dispute." There is no denying that the subject matter of a plunder case is the ill-gotten wealth accumulated, amassed or acquired by a public officer either by himself or in connivance with members of his family, relatives by affinity or consanguinity, business associates, subordinates or other persons, the aggregate or total value of which is at least P50,000,000.00. 44 Since the money deposited in petitioners bank accounts is being proven to be a portion of former President Estradas ill-gotten wealth, it follows that it is the "thing or matter with respect to which the crime of plunder has arisen." Without the ill-gotten wealth, there can be no plunder. Correspondingly, R.A. No. 7080 penalizing plunder mandates that courts shall declare any and all ill-gotten wealth forfeited in favor of the State. 45 Government recovery of the ill-gotten wealth being a consequence of plunder, necessarily an inquiry into the whereabouts of the ill-gotten wealth extends to properties being held or recorded in the name of persons other than the one responsible for the crime of plunder. "Extremely-Detailed" Information contained in the Special Prosecution Panels Requests for Subpoena Duces Tecum/Ad Testificandum - Violative of Petitioners Right to Due Process and Privacy Petitioner also asserts that the "extremely-detailed" information in the Special Prosecution Panels requests shows prior illegal disclosure of his bank accounts.

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I agree. In Grisworld v. Connecticut, 46 the United States Supreme Court announced for the first time that the right to privacy is an independent constitutional right; and that: "Specific guarantees in the Bill of Rights have penumbras, formed by emanation from those guarantees that help give them life and substance. Various guarantees create zones of privacy." Our Bill of Rights, enshrined in Article III of the Constitution, provides at least two guarantees that explicitly create zones of privacy. They highlight a persons "right to be let alone" or the "right to determine what, how much, to whom and when information about himself shall be disclosed." 47 Section 2 guarantees "the right of the people to be secure in their persons, houses, papers and effects against unreasonable searches and seizures of whatever nature and for any purpose." Section 3 renders inviolable the "privacy of communication and correspondence" and further cautions that "any evidence obtained in violation of this or the preceding section shall be inadmissible for any purpose in any proceeding." These zones of privacy are also recognized and protected in our laws, 48 such as civil and criminal laws. Article 26 of the Civil Code mandates that "every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons" and punishes as actionable torts acts such as "prying into the privacy of anothers residence; and meddling with or disturbing the private life or family relations of another." Article 32 states that "any public officer or employee, or any private individual, who directly obstructs, defeats, violates or in any manner impedes or impairs x x x the right to be secure in ones person, house, papers, and effects against unreasonable searches and seizures; x x x the privacy of communication and correspondence" shall be liable for damages. On the other hand, Article 209, 49 Articles 290-292, 50 and Articles 280-281 51 of the Revised Penal Code treat as crimes (a) revelation of secrets by an attorneyat-law or solicitor, (b) discovery and revelation of industrial secrets, and (c) trespass to dwelling, respectively. Aside from the foregoing, invasion of privacy is considered an offense in special laws such as the Anti-Wiretapping Law, Intellectual Property Code of the Philippines 53 and, of course, R.A. No. 1405, the Secrecy of Bank Deposits Act.
52

the

The myriad of laws enumerated only show that there are certain areas in a persons life which even if accessible to the public, may be constitutionally and legally protected as "private." Now, in evaluating a claim for violation of the right to privacy, a court must determine whether a person has exhibited a reasonable expectation of privacy and, if so, whether that expectation has been violated by unreasonable government intrusion. 54 Applying these to the case at bar, the important inquiries are: first, did petitioner exhibit a reasonable expectation of privacy over his bank accounts?; and second, did the government violate such expectation? The answers to both are in the affirmative. It cannot be gainsaid that the customer of a bank expects that the documents which he transmits to the bank in the course of his business operations, will remain private, and that such an expectation is reasonable. 55 Financial transactions can reveal much about a persons affairs, activities, beliefs, habits and associations. Indeed, the totality of bank records provides a virtual current biography. 56 Checks, for instance, in a sense, define a person. By examining them, the agents get to know his doctors, lawyers, creditors, political allies, social connections, religious affiliations, educational interests, the papers and magazines he reads, and so on ad infinitum. 57 In other words, ones bank account mirrors not only his finances, but also his debts, his way of life, his family and his civic commitment. Such reality places a customers bank account within the "expectations of privacy" category. In the Philippines, the expectation is heightened by the enactment of R.A. No. 1405 which mandates that all deposits of whatever nature are considered as of an "absolutely confidential nature" and "may not be examined, inquired or looked into by any person" except under the instances therein. Admittedly, a bank customer knowingly and voluntarily divulges his financial affairs with the bank, but such is immaterial. The fact that one has disclosed private papers to the bank within the context of confidential customer-bank relationship, does not mean that one has waived all right to the privacy of the papers. Like the user of the pay phone in Katz v. United States, 58 who, having paid the toll, was entitled to "assume that the words he utters into the mouthpiece will not be broadcast to the world," so the customer of a bank, having written or deposited a check, has a reasonable expectation that his check will be examined for bank purposes only. Practically speaking, a customers disclosure of his financial affairs is not entirely volitional, since it is impossible to participate in the economic life of contemporary society without maintaining a bank account. 59 Consequently, the customers reasonable expectation is that, absent customary legal process, the matter he reveals to the bank will be utilized by the bank only for internal banking purposes. 60 In the instant case, while admittedly, respondent Sandiganbayans inquiry into petitioners bank accounts falls under the two exceptions mentioned in R.A. No. 1405, 61 however, this Court observes that the manner of inquiry violates petitioners rights to due process and privacy. At this juncture, it is worthy to note that petitioners bank accounts were inquired into twice, first was through subpoenae duces tecum issued by the Office of the Ombudsman and second was through subpoenae duces tecum/ad testificandum issued by respondent Sandiganbayan. Under both instances, petitioner was completely unaware of the issuances of such subpoenae. Petitioner persistently bewailed before respondent Sandiganbayan the prior disclosure of his bank accounts pursuant to the subpoenae issued by the Office of the Ombudsman absent any pending case in court and personal notice to him. He sought the quashal of respondent Sandiganbayans subpoenae duces tecum/ad testificandum on the ground that the Special Prosecution Panels requests for the issuance of the said subpoenae were based on information illegally acquired by the Office of the Ombudsman. I am swayed with the merit of petitioners grievance.

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In Marquez v. Desierto, 62 Ombudsman Aniano A. Desierto ordered petitioner Lourdes Marquez, a Branch Manager of Union Bank, to produce for purposes of an in camera inspection certain bank documents relative to a case pending before the Office of the Ombudsman. Ombudsman Desierto cited the Constitution and Section 15 (8) of R.A. No. 6770 as bases of his authority. Petitioner Marquez initially refused but, after having been threatened with a contempt proceeding, she filed a petition for declaratory relief seeking a clarification of the issue "whether the Order of the Ombudsman to have an in camera inspection of the questioned account is allowed as an exception to the law on secrecy of bank deposits." The Courts ruling is enlightening, thus: "An examination of the secrecy of bank deposits law (R.A. No. 1405) would reveal the following exceptions: 1. Where the depositor consents in writing; 2. Impeachment case; 3. By court order in bribery or dereliction of duty cases against public officials. 4. Deposit is subject of litigation. 5. Sec. 8, R.A. No. 3019, in cases of unexplained wealth as held in the case of PNB v. Gancayco. The order of the Ombudsman to produce for in camera inspection the subject accounts with the Union Bank of the Philippines, Julia Vargas Branch, is based on a pending investigation at the Office of the Ombudsman against Amado Lagdameo, et al. for violation of R.A. No. 3019, Sec. 3 (e) and (g) relative to the Joint Venture Agreement between the Public Estates Authority and AMARI. We rule that before an in camera inspection may be allowed there must be a pending case before a court of competent jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject matter of the pending case before the court of competent jurisdiction. The bank personnel and the account holder must be notified to be present during the inspection, and such inspection may cover only the account identified in the pending case." In Union Bank of the Philippines v. Court of Appeals, we held that Section 2 of the Law on Secrecy of Bank Deposits, as amended, declares bank deposits to be absolutely confidential except: (1) In an examination made in the course of a special or general examination of a bank that is specifically authorized by the Monetary Board after being satisfied that there is reasonable ground to believe that a bank fraud or serious irregularity has been or is being committed and that is necessary to look into the deposit to establish such fraud or irregularity; (2) In an examination made by an independent auditor hired by the bank to conduct its regular audit provided that the examination is for audit purposes only and the results thereof shall be for the exclusive use of the bank; (3) Upon written permission of the depositor; (4) In cases of impeachment; (5) Upon order of a competent court in cases of bribery or dereliction of duty of public officials; or (6) In cases where the money deposited or invested is the subject matter of the litigation. In the case at bar, there is yet no pending litigation before any court of competent authority. What is existing is an investigation by the Office of the Ombudsman. In short, what the Office of the Ombudsman would wish to do is to fish for additional evidence to formally charge Amado Lagdameo, at al., with the Sandiganbayan. Clearly, there was no pending case in court which would warrant the opening of the bank account for inspection." Thus, as held by the Court, before an in camera inspection of bank documents maybe allowed, there must be a pending case before a court of competent jurisdiction. The Information for plunder against Former President Estrada was filed with respondent Sandiganbayan on April 4, 2001. On the other hand, the Ombudsman issued the subpoenae duces tecum on February 8, 16, and March 7, 2001. Clearly, there was yet no pending litigation before any court when such subpoenae were issued. Following the Courts ruling in Marquez, what the Office of the Ombudsman would wish to do was to "fish for evidence" in order to formally charge former President Estrada before respondent Sandiganbayan. At this point, it should be emphasized that the authority of the Ombudsman "to examine and have access to bank accounts and records" must be read in conjunction with Section 2 of R.A. No. 1405 providing that deposits of whatever nature shall be considered confidential except in several instances already mentioned. This is because bank deposits belong to a protected zone where government intrusion could infringe legitimate expectation of privacy. An opposite course is unwarranted. In United States v. United States District Court, 63 the US Supreme Court held that the potential for abuse is particularly acute where the legislative scheme permits access to information without invocation of the judicial process. In such instances, the important responsibility for balancing societal and individual interests is left to unreviewed executive discretion, rather than the scrutiny of a neutral magistrate. In Katz v. United States, 64 the same Court ruled that, "[t[he prosecutors duty and responsibility is to enforce the

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laws, to investigate and to prosecute. Those charged with the investigative and prosecutorial duty should not be the sole judges of when to utilize constitutionally sensitive means in pursuing their tasks. The historical judgment is that unreviewed executive discretion may yield too readily to pressures to obtain incriminating evidence and overlook potential invasions of privacy." Between the government and the citizen, there must be a neutral entity that should balance the formers claim of authority vis--vis the latters assertion of rights. By the natural scheme of things, the Office of the Ombudsman can hardly be characterized as detached, disinterested and neutral. Its mandate is to investigate and prosecute any act or omission of any public officer or employee, office or agency that appears to be illegal, unjust, improper or inefficient. 65 In carrying out such mandate, it is expected to act with vigor and aggressiveness. But to permit such office to have access to bank records without any judicial control as to relevancy or other traditional requirements of due process and to allow the evidence to be used in any subsequent prosecution, opens the door to a vast and unlimited range of very real abuses of police power. 66 True, there are administrative summonses for documents 67 recognized in other jurisdictions, but there is a requirement that their enforcement receives a judicial scrutiny and a judicial order. 68 In this regard, I am appalled by the "whole sale" subpoena duces tecum issued by the Ombudsman directing the "President or Chief Executive Officer of Urban Bank" to produce "bank records and all documents relative thereto pertaining to all bank accounts (Savings, Current, Time Deposit, Trust, Foreign Currency Deposits, etc) under the account names of Jose Velarde, Joseph E. Estrada, Laarni Enriquez, Guia Gomez, Joy Melendrez, Peachy Osorio, Rowena Lopez, Kevin or Kelvin Garcia, 727, 737, 747, 757 and 858." Indubitably, such blanket subpoena provides occasions for "fishing expedition." Above everything else, however, what strikes us most is the patent unfairness of the process. First in the Bill of Rights is the mandate that no person shall be deprived of his life, liberty or property without due process of law. Courts have held that the right of personal privacy is one aspect of the "liberty" protected by the Due Process Clause. 69 Basic due process demands that the Office of the Ombudsman furnish petitioner a copy of the subpoenae duces tecum it issued. In Marquez v. Desierto, 70 this Court held: "The bank personnel and the account holder must be notified to be present during the inspection, and such inspection may cover only the account identified in the pending case." Such notice is not too much to ask for, after all, an accountholder bears the risk not only of losing his privacy but, also, his property. 71 Of course, not to mention the procedural impasse that is encountered by such accountholder who cannot contest the propriety of the issuance of a subpoena. In this case, petitioner was completely unaware of the issuance of subpoenae duces tecum, hence, he never had the opportunity to challenge them. As a matter of fact, almost two years had passed before he learned of such issuance and the resulting disclosure. Indeed, the ugly truth here is that neither the Office of the Ombudsman nor the PDIC notified petitioner of the impending and actual disclosure of his bank accounts. Such absence of notice is a fatal constitutional defect that inheres in a process that omits provision for notice to the bank customer of an invasion of his protected right. 72 Now, let us take a glimpse at the proceedings before respondent Sandiganbayan. The proceedings before respondent Sandiganbayan also leave much to be desired. Neither respondent Sandiganbayan nor the Special Prosecution Panel nor PDIC furnished petitioner copies of the subpoenae duces tecum/ad testificandum or of the requests for their issuance. It bears reiterating that it was only through the media that petitioner learned about such requests. Definitely, something is inherently wrong in a public proceeding that allows a holder of bank account, subject of litigation, to be completely uninformed. Also not to be overlooked is the respondent Sandiganbayans oral directive to petitioner to file his motion to quash not later than 12:00 noon of January 28, 2003. This notwithstanding the fact that it was only the day before, or on January 27, 2003, that petitioner learned about the requests and that he was yet to procure the services of a counsel. Every civilized state adheres to the principle that when a persons life and liberty are jeopardized by government action, it behooves a democratic government to see to it that this jeopardy is fair, reasonable and according to time-honored tradition. The importance of this principle is eloquently underscored by one observer who said: "The quality of a civilization is largely determined by the fairness of its criminal trials." 73 Respondent Sandiganbayan cannot justify its omission by relying on Adorio v. Bersamin, 74 which held that: "Requests by a party for the issuance of subpoenas do not require notice to other parties to the action. No violation of due process results by such lack of notice since the other parties would have ample opportunity to examine the witnesses and documents subpoenaed once they are presented in court." Suffice it to say that petitioner was not a party to the plunder case, hence, he could not have the opportunity to examine the witnesses and the documents subpoenaed. True, bank accounts at times harbor criminal plans. But this is not a reason to declare an open season for inquiry. Customers have a constitutionally justifiable expectation of privacy in the documentary details of the financial transactions reflected in their bank accounts. That wall of privacy, however, is not impregnable. Our Constitution, as well as our laws, provides procedures whereby the confidentiality of ones financial affairs may be disclosed. In other words, access to bank records is controlled by adequate legal process. Here, the subpoenae issued by respondent Sandiganbayan, tainted as they are by the vices that afflict the proceedings before the Office of the Ombudsman, cannot be considered to have been issued pursuant to such adequate legal process. Petitioner, therefore, has reason to feel aggrieved. Section 4, Rule 21 of the 1997 Rules of Civil Procedure, as amended, provides that the court may quash a subpoenae duces tecum upon motion if it is "unreasonable and oppressive." 75 Here, the three (3) subpoenae duces tecum/ad testificandum issued by respondent Sandiganbayan are "unreasonable and oppressive" for the reasons earlier mentioned. I thus find respondent Sandiganbayan to have committed grave abuse of discretion in issuing them. One last word. The violation of petitioners right to privacy could have been obviated had respondent court complied with its duty to be watchful for the constitutional rights of the citizens and against any stealthy encroachments thereon. The motto should always be obsta principiis. 76

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IN VIEW OF THE FOREGOING, I vote to GRANT the Petition. The assailed Resolutions dated February 7, February 12 and March 11, 2003 issued by respondent Sandiganbayan in Criminal Case No. 26558, "People of the Philippines v. Former President Joseph Ejercito Estrada, et al." being tainted with grave abuse of discretion, should be SET ASIDE. The subpoenae duces tecum/ad testificandum dated January 21, 24 and 31, 2003, should be QUASHED for being unreasonable and oppressive.
ANGELINA SANDOVAL-GUTIERREZ

Associate Justice

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SECOND DIVISION

G.R. No. 174629

February 14, 2008

REPUBLIC OF THE PHILIPPINES, Represented by THE ANTI-MONEY LAUNDERING COUNCIL (AMLC), petitioner, vs. HON. ANTONIO M. EUGENIO, JR., AS PRESIDING JUDGE OF RTC, MANILA, BRANCH 34, PANTALEON ALVAREZ and LILIA CHENG, respondents.

DECISION

TINGA, J.:

The present petition for certiorari and prohibition under Rule 65 assails the orders and resolutions issued by two different courts in two different cases. The courts and cases in question are the Regional Trial Court of Manila, Branch 24, which heard SP Case No. 061142001 and the Court of Appeals, Tenth Division, which heared CA-G.R. SP No. 95198. 2 Both cases arose as part of the aftermath of the ruling of this Court in Agan v. PIATCO3 nullifying the concession agreement awarded to the Philippine International Airport Terminal Corporation (PIATCO) over the Ninoy Aquino International Airport International Passenger Terminal 3 (NAIA 3) Project. I. Following the promulgation of Agan, a series of investigations concerning the award of the NAIA 3 contracts to PIATCO were undertaken by the Ombudsman and the Compliance and Investigation Staff (CIS) of petitioner Anti-Money Laundering Council (AMLC). On 24 May 2005, the Office of the Solicitor General (OSG) wrote the AMLC requesting the latters assistance "in obtaining more evidence to completely reveal the financial trail of corruption surrounding the [NAIA 3] Project," and also noting that petitioner Republic of the Philippines was presently defending itself in two international arbitration cases filed in relation to the NAIA 3 Project.4 The CIS conducted an intelligence database search on the financial transactions of certain individuals involved in the award, including respondent Pantaleon Alvarez (Alvarez) who had been the Chairman of the PBAC Technical Committee, NAIA-IPT3 Project.5 By this time, Alvarez had already been charged by the Ombudsman with violation of Section 3(j) of R.A. No. 3019. 6 The search revealed that Alvarez maintained eight (8) bank accounts with six (6) different banks.7 On 27 June 2005, the AMLC issued Resolution No. 75, Series of 2005,8 whereby the Council resolved to authorize the Executive Director of the AMLC "to sign and verify an application to inquire into and/or examine the [deposits] or investments of Pantaleon Alvarez, Wilfredo Trinidad, Alfredo Liongson, and Cheng Yong, and their related web of accounts wherever these may be found, as defined under Rule 10.4 of the Revised Implementing Rules and Regulations;" and to authorize the AMLC Secretariat "to conduct an inquiry into subject accounts once the Regional Trial Court grants the application to inquire into and/or examine the bank accounts" of those four individuals.9 The resolution enumerated the particular bank accounts of Alvarez, Wilfredo Trinidad (Trinidad), Alfredo Liongson (Liongson) and Cheng Yong which were to be the subject of the inquiry.10 The rationale for the said resolution was founded on the cited findings of the CIS that amounts were transferred from a Hong Kong bank account owned by Jetstream Pacific Ltd. Account to bank accounts in the Philippines maintained by Liongson and Cheng Yong. 11 The Resolution also noted that "[b]y awarding the contract to PIATCO despite its lack of financial capacity, Pantaleon Alvarez caused undue injury to the government by giving PIATCO unwarranted benefits, advantage, or preference in the discharge of his official administrative functions through manifest partiality, evident bad faith, or gross inexcusable negligence, in violation of Section 3(e) of Republic Act No. 3019."12 Under the authority granted by the Resolution, the AMLC filed an application to inquire into or examine the deposits or investments of Alvarez, Trinidad, Liongson and Cheng Yong before the RTC of Makati, Branch 138, presided by Judge (now Court of Appeals Justice) Sixto Marella, Jr. The application was docketed as AMLC No. 05-005.13 The Makati RTC heard the testimony of the Deputy Director of the AMLC, Richard David C. Funk II, and received the documentary evidence of the AMLC. 14 Thereafter, on 4 July 2005, the Makati RTC rendered an Order (Makati RTC bank inquiry order) granting the AMLC the authority to inquire and examine the subject bank accounts of Alvarez, Trinidad, Liongson and Cheng Yong, the trial court being satisfied that there existed "[p]robable cause [to] believe that the deposits in various bank accounts, details of which appear in paragraph 1 of the Application, are related to the offense of violation of Anti-Graft and Corrupt Practices Act now the subject of criminal prosecution before the Sandiganbayan as attested to by the Informations, Exhibits C, D, E, F, and G."15 Pursuant to the Makati RTC bank inquiry order, the CIS proceeded to inquire and examine the deposits, investments and related web accounts of the four.16 Meanwhile, the Special Prosecutor of the Office of the Ombudsman, Dennis Villa-Ignacio, wrote a letter dated 2 November 2005, requesting the AMLC to investigate the accounts of Alvarez, PIATCO, and several other entities involved in the nullified contract. The letter adverted to probable cause to believe that the bank accounts "were used in the commission of unlawful activities that were committed" in relation to the criminal cases then pending before the Sandiganbayan.17 Attached to the letter was a memorandum "on why the investigation of the [accounts] is necessary in the prosecution of the above criminal cases before the Sandiganbayan."18 In response to the letter of the Special Prosecutor, the AMLC promulgated on 9 December 2005 Resolution No. 121 Series of 2005, 19 which authorized the executive director of the AMLC to inquire into and examine the accounts named in the letter, including one maintained by Alvarez with DBS Bank and two other accounts in the name of Cheng Yong with Metrobank. The Resolution characterized the memorandum attached to the Special Prosecutors letter as "extensively justif[ying] the existence of probable cause that the bank accounts of the persons and entities mentioned in the letter are related to the unlawful activity of violation of Sections 3(g) and 3(e) of Rep. Act No. 3019, as amended."20 Following the December 2005 AMLC Resolution, the Republic, through the AMLC, filed an application21 before the Manila RTC to inquire into and/or examine thirteen (13) accounts and two (2) related web of accounts alleged as having been used to facilitate corruption in the NAIA 3 Project. Among said accounts were the DBS Bank account of Alvarez and the Metrobank accounts of Cheng

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Yong. The case was raffled to Manila RTC, Branch 24, presided by respondent Judge Antonio Eugenio, Jr., and docketed as SP Case No. 06-114200. On 12 January 2006, the Manila RTC issued an Order (Manila RTC bank inquiry order) granting the Ex Parte Application expressing therein "[that] the allegations in said application to be impressed with merit, and in conformity with Section 11 of R.A. No. 9160, as amended, otherwise known as the Anti-Money Laundering Act (AMLA) of 2001 and Rules 11.1 and 11.2 of the Revised Implementing Rules and Regulations."22 Authority was thus granted to the AMLC to inquire into the bank accounts listed therein. On 25 January 2006, Alvarez, through counsel, entered his appearance23 before the Manila RTC in SP Case No. 06-114200 and filed an Urgent Motion to Stay Enforcement of Order of January 12, 2006. 24 Alvarez alleged that he fortuitously learned of the bank inquiry order, which was issued following an ex parte application, and he argued that nothing in R.A. No. 9160 authorized the AMLC to seek the authority to inquire into bank accounts ex parte.25 The day after Alvarez filed his motion, 26 January 2006, the Manila RTC issued an Order26 staying the enforcement of its bank inquiry order and giving the Republic five (5) days to respond to Alvarezs motion. The Republic filed an Omnibus Motion for Reconsideration27 of the 26 January 2006 Manila RTC Order and likewise sought to strike out Alvarezs motion that led to the issuance of said order. For his part, Alvarez filed a Reply and Motion to Dismiss28 the application for bank inquiry order. On 2 May 2006, the Manila RTC issued an Omnibus Order29 granting the Republics Motion for Reconsideration, denying Alvarezs motion to dismiss and reinstating "in full force and effect" the Order dated 12 January 2006. In the omnibus order, the Manila RTC reiterated that the material allegations in the application for bank inquiry order filed by the Republic stood as "the probable cause for the investigation and examination of the bank accounts and investments of the respondents."30 Alvarez filed on 10 May 2006 an Urgent Motion31 expressing his apprehension that the AMLC would immediately enforce the omnibus order and would thereby render the motion for reconsideration he intended to file as moot and academic; thus he sought that the Republic be refrained from enforcing the omnibus order in the meantime. Acting on this motion, the Manila RTC, on 11 May 2006, issued an Order32 requiring the OSG to file a comment/opposition and reminding the parties that judgments and orders become final and executory upon the expiration of fifteen (15) days from receipt thereof, as it is the period within which a motion for reconsideration could be filed. Alvarez filed his Motion for Reconsideration33 of the omnibus order on 15 May 2006, but the motion was denied by the Manila RTC in an Order34 dated 5 July 2006. On 11 July 2006, Alvarez filed an Urgent Motion and Manifestation 35 wherein he manifested having received reliable information that the AMLC was about to implement the Manila RTC bank inquiry order even though he was intending to appeal from it. On the premise that only a final and executory judgment or order could be executed or implemented, Alvarez sought that the AMLC be immediately ordered to refrain from enforcing the Manila RTC bank inquiry order. On 12 July 2006, the Manila RTC, acting on Alvarezs latest motion, issued an Order 36 directing the AMLC "to refrain from enforcing the order dated January 12, 2006 until the expiration of the period to appeal, without any appeal having been filed." On the same day, Alvarez filed a Notice of Appeal37 with the Manila RTC. On 24 July 2006, Alvarez filed an Urgent Ex Parte Motion for Clarification.38 Therein, he alleged having learned that the AMLC had began to inquire into the bank accounts of the other persons mentioned in the application for bank inquiry order filed by the Republic.39 Considering that the Manila RTC bank inquiry order was issued ex parte, without notice to those other persons, Alvarez prayed that the AMLC be ordered to refrain from inquiring into any of the other bank deposits and alleged web of accounts enumerated in AMLCs application with the RTC; and that the AMLC be directed to refrain from using, disclosing or publishing in any proceeding or venue any information or document obtained in violation of the 11 May 2006 RTC Order.40 On 25 July 2006, or one day after Alvarez filed his motion, the Manila RTC issued an Order41 wherein it clarified that "the Ex Parte Order of this Court dated January 12, 2006 can not be implemented against the deposits or accounts of any of the persons enumerated in the AMLC Application until the appeal of movant Alvarez is finally resolved, otherwise, the appeal would be rendered moot and academic or even nugatory."42 In addition, the AMLC was ordered "not to disclose or publish any information or document found or obtained in [v]iolation of the May 11, 2006 Order of this Court."43 The Manila RTC reasoned that the other persons mentioned in AMLCs application were not served with the courts 12 January 2006 Order. This 25 July 2006 Manila RTC Order is the first of the four rulings being assailed through this petition. In response, the Republic filed an Urgent Omnibus Motion for Reconsideration44 dated 27 July 2006, urging that it be allowed to immediately enforce the bank inquiry order against Alvarez and that Alvarezs notice of appeal be expunged from the records since appeal from an order of inquiry is disallowed under the Anti money Laundering Act (AMLA). Meanwhile, respondent Lilia Cheng filed with the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus with Application for TRO and/or Writ of Preliminary Injunction45 dated 10 July 2006, directed against the Republic of the Philippines through the AMLC, Manila RTC Judge Eugenio, Jr. and Makati RTC Judge Marella, Jr.. She identified herself as the wife of Cheng Yong46 with whom she jointly owns a conjugal bank account with Citibank that is covered by the Makati RTC bank inquiry order, and two conjugal bank accounts with Metrobank that are covered by the Manila RTC bank inquiry order. Lilia Cheng imputed grave abuse of discretion on the part of the Makati and Manila RTCs in granting AMLCs ex parte applications for a bank inquiry order, arguing among others that the ex parte applications violated her constitutional right to due process, that the bank inquiry order under the AMLA can only be granted in connection with violations of the AMLA and that the AMLA can not apply to bank accounts opened and transactions entered into prior to the effectivity of the AMLA or to bank accounts located outside the Philippines.47 On 1 August 2006, the Court of Appeals, acting on Lilia Chengs petition, issued a Temporary Restraining Order48 enjoining the Manila and Makati trial courts from implementing, enforcing or executing the respective bank inquiry orders previously issued, and the AMLC from enforcing and implementing such orders. On even date, the Manila RTC issued an Order 49 resolving to hold in abeyance the resolution of the urgent omnibus motion for reconsideration then pending before it until the resolution of Lilia Chengs petition for

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certiorari with the Court of Appeals. The Court of Appeals Resolution directing the issuance of the temporary restraining order is the second of the four rulings assailed in the present petition. The third assailed ruling50 was issued on 15 August 2006 by the Manila RTC, acting on the Urgent Motion for Clarification51 dated 14 August 2006 filed by Alvarez. It appears that the 1 August 2006 Manila RTC Order had amended its previous 25 July 2006 Order by deleting the last paragraph which stated that the AMLC "should not disclose or publish any information or document found or obtained in violation of the May 11, 2006 Order of this Court."52 In this new motion, Alvarez argued that the deletion of that paragraph would allow the AMLC to implement the bank inquiry orders and publish whatever information it might obtain thereupon even before the final orders of the Manila RTC could become final and executory.53 In the 15 August 2006 Order, the Manila RTC reiterated that the bank inquiry order it had issued could not be implemented or enforced by the AMLC or any of its representatives until the appeal therefrom was finally resolved and that any enforcement thereof would be unauthorized.54 The present Consolidated Petition55 for certiorari and prohibition under Rule 65 was filed on 2 October 2006, assailing the two Orders of the Manila RTC dated 25 July and 15 August 2006 and the Temporary Restraining Order dated 1 August 2006 of the Court of Appeals. Through an Urgent Manifestation and Motion56 dated 9 October 2006, petitioner informed the Court that on 22 September 2006, the Court of Appeals hearing Lilia Chengs petition had granted a writ of preliminary injunction in her favor.57 Thereafter, petitioner sought as well the nullification of the 22 September 2006 Resolution of the Court of Appeals, thereby constituting the fourth ruling assailed in the instant petition.58 The Court had initially granted a Temporary Restraining Order59 dated 6 October 2006 and later on a Supplemental Temporary Restraining Order60 dated 13 October 2006 in petitioners favor, enjoining the implementation of the assailed rulings of the Manila RTC and the Court of Appeals. However, on respondents motion, the Court, through a Resolution61 dated 11 December 2006, suspended the implementation of the restraining orders it had earlier issued. Oral arguments were held on 17 January 2007. The Court consolidated the issues for argument as follows: 1. Did the RTC-Manila, in issuing the Orders dated 25 July 2006 and 15 August 2006 which deferred the implementation of its Order dated 12 January 2006, and the Court of Appeals, in issuing its Resolution dated 1 August 2006, which ordered the status quo in relation to the 1 July 2005 Order of the RTC-Makati and the 12 January 2006 Order of the RTC-Manila, both of which authorized the examination of bank accounts under Section 11 of Rep. Act No. 9160 (AMLA), commit grave abuse of discretion? (a) Is an application for an order authorizing inquiry into or examination of bank accounts or investments under Section 11 of the AMLA ex-parte in nature or one which requires notice and hearing? (b) What legal procedures and standards should be observed in the conduct of the proceedings for the issuance of said order? (c) Is such order susceptible to legal challenges and judicial review? 2. Is it proper for this Court at this time and in this case to inquire into and pass upon the validity of the 1 July 2005 Order of the RTC-Makati and the 12 January 2006 Order of the RTC-Manila, considering the pendency of CA G.R. SP No. 95-198 (Lilia Cheng v. Republic) wherein the validity of both orders was challenged?62 After the oral arguments, the parties were directed to file their respective memoranda, which they did, 63 and the petition was thereafter deemed submitted for resolution. II. Petitioners general advocacy is that the bank inquiry orders issued by the Manila and Makati RTCs are valid and immediately enforceable whereas the assailed rulings, which effectively stayed the enforcement of the Manila and Makati RTCs bank inquiry orders, are sullied with grave abuse of discretion. These conclusions flow from the posture that a bank inquiry order, issued upon a finding of probable cause, may be issued ex parte and, once issued, is immediately executory. Petitioner further argues that the information obtained following the bank inquiry is necessarily beneficial, if not indispensable, to the AMLC in discharging its awesome responsibility regarding the effective implementation of the AMLA and that any restraint in the disclosure of such information to appropriate agencies or other judicial fora would render meaningless the relief supplied by the bank inquiry order. Petitioner raises particular arguments questioning Lilia Chengs right to seek injunctive relief before the Court of Appeals, noting that not one of the bank inquiry orders is directed against her. Her "cryptic assertion" that she is the wife of Cheng Yong cannot, according to petitioner, "metamorphose into the requisite legal standing to seek redress for an imagined injury or to maintain an action in behalf of another." In the same breath, petitioner argues that Alvarez cannot assert any violation of the right to financial privacy in behalf of other persons whose bank accounts are being inquired into, particularly those other persons named in the Makati RTC bank inquiry order who did not take any step to oppose such orders before the courts. Ostensibly, the proximate question before the Court is whether a bank inquiry order issued in accordance with Section 10 of the AMLA may be stayed by injunction. Yet in arguing that it does, petitioner relies on what it posits as the final and immediately executory character of the bank inquiry orders issued by the Manila and Makati RTCs. Implicit in that position is the notion that the inquiry orders are valid, and such notion is susceptible to review and validation based on what appears on the face of the orders and the applications which triggered their issuance, as well as the provisions of the AMLA governing the issuance of such orders. Indeed, to

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test the viability of petitioners argument, the Court will have to be satisfied that the subject inquiry orders are valid in the first place. However, even from a cursory examination of the applications for inquiry order and the orders themselves, it is evident that the orders are not in accordance with law. III. A brief overview of the AMLA is called for. Money laundering has been generally defined by the International Criminal Police Organization (Interpol) `as "any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources." 64 Even before the passage of the AMLA, the problem was addressed by the Philippine government through the issuance of various circulars by the Bangko Sentral ng Pilipinas. Yet ultimately, legislative proscription was necessary, especially with the inclusion of the Philippines in the Financial Action Task Forces list of non-cooperative countries and territories in the fight against money laundering.65 The original AMLA, Republic Act (R.A.) No. 9160, was passed in 2001. It was amended by R.A. No. 9194 in 2003. Section 4 of the AMLA states that "[m]oney laundering is a crime whereby the proceeds of an unlawful activity as [defined in the law] are transacted, thereby making them appear to have originated from legitimate sources."66 The section further provides the three modes through which the crime of money laundering is committed. Section 7 creates the AMLC and defines its powers, which generally relate to the enforcement of the AMLA provisions and the initiation of legal actions authorized in the AMLA such as civil forefeiture proceedings and complaints for the prosecution of money laundering offenses.67 In addition to providing for the definition and penalties for the crime of money laundering, the AMLA also authorizes certain provisional remedies that would aid the AMLC in the enforcement of the AMLA. These are the "freeze order" authorized under Section 10, and the "bank inquiry order" authorized under Section 11. Respondents posit that a bank inquiry order under Section 11 may be obtained only upon the pre-existence of a money laundering offense case already filed before the courts.68 The conclusion is based on the phrase "upon order of any competent court in cases of violation of this Act," the word "cases" generally understood as referring to actual cases pending with the courts. We are unconvinced by this proposition, and agree instead with the then Solicitor General who conceded that the use of the phrase "in cases of" was unfortunate, yet submitted that it should be interpreted to mean "in the event there are violations" of the AMLA, and not that there are already cases pending in court concerning such violations.69 If the contrary position is adopted, then the bank inquiry order would be limited in purpose as a tool in aid of litigation of live cases, and wholly inutile as a means for the government to ascertain whether there is sufficient evidence to sustain an intended prosecution of the account holder for violation of the AMLA. Should that be the situation, in all likelihood the AMLC would be virtually deprived of its character as a discovery tool, and thus would become less circumspect in filing complaints against suspect account holders. After all, under such set-up the preferred strategy would be to allow or even encourage the indiscriminate filing of complaints under the AMLA with the hope or expectation that the evidence of money laundering would somehow surface during the trial. Since the AMLC could not make use of the bank inquiry order to determine whether there is evidentiary basis to prosecute the suspected malefactors, not filing any case at all would not be an alternative. Such unwholesome set-up should not come to pass. Thus Section 11 cannot be interpreted in a way that would emasculate the remedy it has established and encourage the unfounded initiation of complaints for money laundering. Still, even if the bank inquiry order may be availed of without need of a pre-existing case under the AMLA, it does not follow that such order may be availed of ex parte. There are several reasons why the AMLA does not generally sanction ex parte applications and issuances of the bank inquiry order. IV. It is evident that Section 11 does not specifically authorize, as a general rule, the issuance ex parte of the bank inquiry order. We quote the provision in full: SEC. 11. Authority to Inquire into Bank Deposits. Notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any particular deposit or investment with any banking institution or non bank financial institution upon order of any competent court in cases of violation of this Act, when it has been established that there is probable cause that the deposits or investments are related to an unlawful activity as defined in Section 3(i) hereof or a money laundering offense under Section 4 hereof, except that no court order shall be required in cases involving unlawful activities defined in Sections 3(i)1, (2) and (12). To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or examine any deposit of investment with any banking institution or non bank financial institution when the examination is made in the course of a periodic or special examination, in accordance with the rules of examination of the BSP.70 (Emphasis supplied) Of course, Section 11 also allows the AMLC to inquire into bank accounts without having to obtain a judicial order in cases where there is probable cause that the deposits or investments are related to kidnapping for ransom,71 certain violations of the Comprehensive Dangerous Drugs Act of 2002,72 hijacking and other violations under R.A. No. 6235, destructive arson and murder. Since such special circumstances do not apply in this case, there is no need for us to pass comment on this proviso. Suffice it to say, the proviso contemplates a situation distinct from that which presently confronts us, and for purposes of the succeeding discussion, our reference to Section 11 of the AMLA excludes said proviso.

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In the instances where a court order is required for the issuance of the bank inquiry order, nothing in Section 11 specifically authorizes that such court order may be issued ex parte. It might be argued that this silence does not preclude the ex parte issuance of the bank inquiry order since the same is not prohibited under Section 11. Yet this argument falls when the immediately preceding provision, Section 10, is examined. SEC. 10. Freezing of Monetary Instrument or Property. The Court of Appeals, upon application ex parte by the AMLC and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Section 3(i) hereof, may issue a freeze order which shall be effective immediately. The freeze order shall be for a period of twenty (20) days unless extended by the court.73 Although oriented towards different purposes, the freeze order under Section 10 and the bank inquiry order under Section 11 are similar in that they are extraordinary provisional reliefs which the AMLC may avail of to effectively combat and prosecute money laundering offenses. Crucially, Section 10 uses specific language to authorize an ex parte application for the provisional relief therein, a circumstance absent in Section 11. If indeed the legislature had intended to authorize ex parte proceedings for the issuance of the bank inquiry order, then it could have easily expressed such intent in the law, as it did with the freeze order under Section 10. Even more tellingly, the current language of Sections 10 and 11 of the AMLA was crafted at the same time, through the passage of R.A. No. 9194. Prior to the amendatory law, it was the AMLC, not the Court of Appeals, which had authority to issue a freeze order, whereas a bank inquiry order always then required, without exception, an order from a competent court.74 It was through the same enactment that ex parte proceedings were introduced for the first time into the AMLA, in the case of the freeze order which now can only be issued by the Court of Appeals. It certainly would have been convenient, through the same amendatory law, to allow a similar ex parte procedure in the case of a bank inquiry order had Congress been so minded. Yet nothing in the provision itself, or even the available legislative record, explicitly points to an ex parte judicial procedure in the application for a bank inquiry order, unlike in the case of the freeze order. That the AMLA does not contemplate ex parte proceedings in applications for bank inquiry orders is confirmed by the present implementing rules and regulations of the AMLA, promulgated upon the passage of R.A. No. 9194. With respect to freeze orders under Section 10, the implementing rules do expressly provide that the applications for freeze orders be filed ex parte,75 but no similar clearance is granted in the case of inquiry orders under Section 11.76 These implementing rules were promulgated by the Bangko Sentral ng Pilipinas, the Insurance Commission and the Securities and Exchange Commission,77 and if it was the true belief of these institutions that inquiry orders could be issued ex parte similar to freeze orders, language to that effect would have been incorporated in the said Rules. This is stressed not because the implementing rules could authorize ex parte applications for inquiry orders despite the absence of statutory basis, but rather because the framers of the law had no intention to allow such ex parte applications. Even the Rules of Procedure adopted by this Court in A.M. No. 05-11-04-SC78 to enforce the provisions of the AMLA specifically authorize ex parte applications with respect to freeze orders under Section 10 79 but make no similar authorization with respect to bank inquiry orders under Section 11. The Court could divine the sense in allowing ex parte proceedings under Section 10 and in proscribing the same under Section 11. A freeze order under Section 10 on the one hand is aimed at preserving monetary instruments or property in any way deemed related to unlawful activities as defined in Section 3(i) of the AMLA. The owner of such monetary instruments or property would thus be inhibited from utilizing the same for the duration of the freeze order. To make such freeze order anteceded by a judicial proceeding with notice to the account holder would allow for or lead to the dissipation of such funds even before the order could be issued. On the other hand, a bank inquiry order under Section 11 does not necessitate any form of physical seizure of property of the account holder. What the bank inquiry order authorizes is the examination of the particular deposits or investments in banking institutions or non-bank financial institutions. The monetary instruments or property deposited with such banks or financial institutions are not seized in a physical sense, but are examined on particular details such as the account holders record of deposits and transactions. Unlike the assets subject of the freeze order, the records to be inspected under a bank inquiry order cannot be physically seized or hidden by the account holder. Said records are in the possession of the bank and therefore cannot be destroyed at the instance of the account holder alone as that would require the extraordinary cooperation and devotion of the bank. Interestingly, petitioners memorandum does not attempt to demonstrate before the Court that the bank inquiry order under Section 11 may be issued ex parte, although the petition itself did devote some space for that argument. The petition argues that the bank inquiry order is "a special and peculiar remedy, drastic in its name, and made necessary because of a public necessity [t]hus, by its very nature, the application for an order or inquiry must necessarily, be ex parte." This argument is insufficient justification in light of the clear disinclination of Congress to allow the issuance ex parte of bank inquiry orders under Section 11, in contrast to the legislatures clear inclination to allow the ex parte grant of freeze orders under Section 10. Without doubt, a requirement that the application for a bank inquiry order be done with notice to the account holder will alert the latter that there is a plan to inspect his bank account on the belief that the funds therein are involved in an unlawful activity or money laundering offense.80 Still, the account holder so alerted will in fact be unable to do anything to conceal or cleanse his bank account records of suspicious or anomalous transactions, at least not without the whole-hearted cooperation of the bank, which inherently has no vested interest to aid the account holder in such manner. V. The necessary implication of this finding that Section 11 of the AMLA does not generally authorize the issuance ex parte of the bank inquiry order would be that such orders cannot be issued unless notice is given to the owners of the account, allowing them the

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opportunity to contest the issuance of the order. Without such a consequence, the legislated distinction between ex parte proceedings under Section 10 and those which are not ex parte under Section 11 would be lost and rendered useless. There certainly is fertile ground to contest the issuance of an ex parte order. Section 11 itself requires that it be established that "there is probable cause that the deposits or investments are related to unlawful activities," and it obviously is the court which stands as arbiter whether there is indeed such probable cause. The process of inquiring into the existence of probable cause would involve the function of determination reposed on the trial court. Determination clearly implies a function of adjudication on the part of the trial court, and not a mechanical application of a standard pre-determination by some other body. The word "determination" implies deliberation and is, in normal legal contemplation, equivalent to "the decision of a court of justice."81 The court receiving the application for inquiry order cannot simply take the AMLCs word that probable cause exists that the deposits or investments are related to an unlawful activity. It will have to exercise its own determinative function in order to be convinced of such fact. The account holder would be certainly capable of contesting such probable cause if given the opportunity to be apprised of the pending application to inquire into his account; hence a notice requirement would not be an empty spectacle. It may be so that the process of obtaining the inquiry order may become more cumbersome or prolonged because of the notice requirement, yet we fail to see any unreasonable burden cast by such circumstance. After all, as earlier stated, requiring notice to the account holder should not, in any way, compromise the integrity of the bank records subject of the inquiry which remain in the possession and control of the bank. Petitioner argues that a bank inquiry order necessitates a finding of probable cause, a characteristic similar to a search warrant which is applied to and heard ex parte. We have examined the supposed analogy between a search warrant and a bank inquiry order yet we remain to be unconvinced by petitioner. The Constitution and the Rules of Court prescribe particular requirements attaching to search warrants that are not imposed by the AMLA with respect to bank inquiry orders. A constitutional warrant requires that the judge personally examine under oath or affirmation the complainant and the witnesses he may produce,82 such examination being in the form of searching questions and answers.83 Those are impositions which the legislative did not specifically prescribe as to the bank inquiry order under the AMLA, and we cannot find sufficient legal basis to apply them to Section 11 of the AMLA. Simply put, a bank inquiry order is not a search warrant or warrant of arrest as it contemplates a direct object but not the seizure of persons or property. Even as the Constitution and the Rules of Court impose a high procedural standard for the determination of probable cause for the issuance of search warrants which Congress chose not to prescribe for the bank inquiry order under the AMLA, Congress nonetheless disallowed ex parte applications for the inquiry order. We can discern that in exchange for these procedural standards normally applied to search warrants, Congress chose instead to legislate a right to notice and a right to be heard characteristics of judicial proceedings which are not ex parte. Absent any demonstrable constitutional infirmity, there is no reason for us to dispute such legislative policy choices. VI. The Courts construction of Section 11 of the AMLA is undoubtedly influenced by right to privacy considerations. If sustained, petitioners argument that a bank account may be inspected by the government following an ex parte proceeding about which the depositor would know nothing would have significant implications on the right to privacy, a right innately cherished by all notwithstanding the legally recognized exceptions thereto. The notion that the government could be so empowered is cause for concern of any individual who values the right to privacy which, after all, embodies even the right to be "let alone," the most comprehensive of rights and the right most valued by civilized people.84 One might assume that the constitutional dimension of the right to privacy, as applied to bank deposits, warrants our present inquiry. We decline to do so. Admittedly, that question has proved controversial in American jurisprudence. Notably, the United States Supreme Court in U.S. v. Miller85 held that there was no legitimate expectation of privacy as to the bank records of a depositor. 86 Moreover, the text of our Constitution has not bothered with the triviality of allocating specific rights peculiar to bank deposits. However, sufficient for our purposes, we can assert there is a right to privacy governing bank accounts in the Philippines, and that such right finds application to the case at bar. The source of such right is statutory, expressed as it is in R.A. No. 1405 otherwise known as the Bank Secrecy Act of 1955. The right to privacy is enshrined in Section 2 of that law, to wit: SECTION 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation. (Emphasis supplied) Because of the Bank Secrecy Act, the confidentiality of bank deposits remains a basic state policy in the Philippines.87 Subsequent laws, including the AMLA, may have added exceptions to the Bank Secrecy Act, yet the secrecy of bank deposits still lies as the general rule. It falls within the zones of privacy recognized by our laws.88 The framers of the 1987 Constitution likewise recognized that bank accounts are not covered by either the right to information89 under Section 7, Article III or under the requirement of full public disclosure90 under Section 28, Article II.91 Unless the Bank Secrecy Act is repealed or

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amended, the legal order is obliged to conserve the absolutely confidential nature of Philippine bank deposits. Any exception to the rule of absolute confidentiality must be specifically legislated. Section 2 of the Bank Secrecy Act itself prescribes exceptions whereby these bank accounts may be examined by "any person, government official, bureau or office"; namely when: (1) upon written permission of the depositor; (2) in cases of impeachment; (3) the examination of bank accounts is upon order of a competent court in cases of bribery or dereliction of duty of public officials; and (4) the money deposited or invested is the subject matter of the litigation. Section 8 of R.A. Act No. 3019, the Anti-Graft and Corrupt Practices Act, has been recognized by this Court as constituting an additional exception to the rule of absolute confidentiality,92 and there have been other similar recognitions as well.93 The AMLA also provides exceptions to the Bank Secrecy Act. Under Section 11, the AMLC may inquire into a bank account upon order of any competent court in cases of violation of the AMLA, it having been established that there is probable cause that the deposits or investments are related to unlawful activities as defined in Section 3(i) of the law, or a money laundering offense under Section 4 thereof. Further, in instances where there is probable cause that the deposits or investments are related to kidnapping for ransom, 94 certain violations of the Comprehensive Dangerous Drugs Act of 2002,95 hijacking and other violations under R.A. No. 6235, destructive arson and murder, then there is no need for the AMLC to obtain a court order before it could inquire into such accounts. It cannot be successfully argued the proceedings relating to the bank inquiry order under Section 11 of the AMLA is a "litigation" encompassed in one of the exceptions to the Bank Secrecy Act which is when "the money deposited or invested is the subject matter of the litigation." The orientation of the bank inquiry order is simply to serve as a provisional relief or remedy. As earlier stated, the application for such does not entail a full-blown trial. Nevertheless, just because the AMLA establishes additional exceptions to the Bank Secrecy Act it does not mean that the later law has dispensed with the general principle established in the older law that "[a]ll deposits of whatever nature with banks or banking institutions in the Philippines x x x are hereby considered as of an absolutely confidential nature." 96 Indeed, by force of statute, all bank deposits are absolutely confidential, and that nature is unaltered even by the legislated exceptions referred to above. There is disfavor towards construing these exceptions in such a manner that would authorize unlimited discretion on the part of the government or of any party seeking to enforce those exceptions and inquire into bank deposits. If there are doubts in upholding the absolutely confidential nature of bank deposits against affirming the authority to inquire into such accounts, then such doubts must be resolved in favor of the former. Such a stance would persist unless Congress passes a law reversing the general state policy of preserving the absolutely confidential nature of Philippine bank accounts. The presence of this statutory right to privacy addresses at least one of the arguments raised by petitioner, that Lilia Cheng had no personality to assail the inquiry orders before the Court of Appeals because she was not the subject of said orders. AMLC Resolution No. 75, which served as the basis in the successful application for the Makati inquiry order, expressly adverts to Citibank Account No. 88576248 "owned by Cheng Yong and/or Lilia G. Cheng with Citibank N.A.,"97 whereas Lilia Chengs petition before the Court of Appeals is accompanied by a certification from Metrobank that Account Nos. 300852436-0 and 700149801-7, both of which are among the subjects of the Manila inquiry order, are accounts in the name of "Yong Cheng or Lilia Cheng."98 Petitioner does not specifically deny that Lilia Cheng holds rights of ownership over the three said accounts, laying focus instead on the fact that she was not named as a subject of either the Makati or Manila RTC inquiry orders. We are reasonably convinced that Lilia Cheng has sufficiently demonstrated her joint ownership of the three accounts, and such conclusion leads us to acknowledge that she has the standing to assail via certiorari the inquiry orders authorizing the examination of her bank accounts as the orders interfere with her statutory right to maintain the secrecy of said accounts. While petitioner would premise that the inquiry into Lilia Chengs accounts finds root in Section 11 of the AMLA, it cannot be denied that the authority to inquire under Section 11 is only exceptional in character, contrary as it is to the general rule preserving the secrecy of bank deposits. Even though she may not have been the subject of the inquiry orders, her bank accounts nevertheless were, and she thus has the standing to vindicate the right to secrecy that attaches to said accounts and their owners. This statutory right to privacy will not prevent the courts from authorizing the inquiry anyway upon the fulfillment of the requirements set forth under Section 11 of the AMLA or Section 2 of the Bank Secrecy Act; at the same time, the owner of the accounts have the right to challenge whether the requirements were indeed complied with. VII. There is a final point of concern which needs to be addressed. Lilia Cheng argues that the AMLA, being a substantive penal statute, has no retroactive effect and the bank inquiry order could not apply to deposits or investments opened prior to the effectivity of Rep. Act No. 9164, or on 17 October 2001. Thus, she concludes, her subject bank accounts, opened between 1989 to 1990, could not be the subject of the bank inquiry order lest there be a violation of the constitutional prohibition against ex post facto laws. No ex post facto law may be enacted,99 and no law may be construed in such fashion as to permit a criminal prosecution offensive to the ex post facto clause. As applied to the AMLA, it is plain that no person may be prosecuted under the penal provisions of the AMLA for acts committed prior to the enactment of the law on 17 October 2001. As much was understood by the lawmakers since they deliberated upon the AMLA, and indeed there is no serious dispute on that point. Does the proscription against ex post facto laws apply to the interpretation of Section 11, a provision which does not provide for a penal sanction but which merely authorizes the inspection of suspect accounts and deposits? The answer is in the affirmative. In this jurisdiction, we have defined an ex post facto law as one which either: (1) makes criminal an act done before the passage of the law and which was innocent when done, and punishes such an act; (2) aggravates a crime, or makes it greater than it was, when committed;

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(3) changes the punishment and inflicts a greater punishment than the law annexed to the crime when committed; (4) alters the legal rules of evidence, and authorizes conviction upon less or different testimony than the law required at the time of the commission of the offense; (5) assuming to regulate civil rights and remedies only, in effect imposes penalty or deprivation of a right for something which when done was lawful; and (6) deprives a person accused of a crime of some lawful protection to which he has become entitled, such as the protection of a former conviction or acquittal, or a proclamation of amnesty. (Emphasis supplied)100 Prior to the enactment of the AMLA, the fact that bank accounts or deposits were involved in activities later on enumerated in Section 3 of the law did not, by itself, remove such accounts from the shelter of absolute confidentiality. Prior to the AMLA, in order that bank accounts could be examined, there was need to secure either the written permission of the depositor or a court order authorizing such examination, assuming that they were involved in cases of bribery or dereliction of duty of public officials, or in a case where the money deposited or invested was itself the subject matter of the litigation. The passage of the AMLA stripped another layer off the rule on absolute confidentiality that provided a measure of lawful protection to the account holder. For that reason, the application of the bank inquiry order as a means of inquiring into records of transactions entered into prior to the passage of the AMLA would be constitutionally infirm, offensive as it is to the ex post facto clause. Still, we must note that the position submitted by Lilia Cheng is much broader than what we are willing to affirm. She argues that the proscription against ex post facto laws goes as far as to prohibit any inquiry into deposits or investments included in bank accounts opened prior to the effectivity of the AMLA even if the suspect transactions were entered into when the law had already taken effect. The Court recognizes that if this argument were to be affirmed, it would create a horrible loophole in the AMLA that would in turn supply the means to fearlessly engage in money laundering in the Philippines; all that the criminal has to do is to make sure that the money laundering activity is facilitated through a bank account opened prior to 2001. Lilia Cheng admits that "actual money launderers could utilize the ex post facto provision of the Constitution as a shield" but that the remedy lay with Congress to amend the law. We can hardly presume that Congress intended to enact a self-defeating law in the first place, and the courts are inhibited from such a construction by the cardinal rule that "a law should be interpreted with a view to upholding rather than destroying it."101 Besides, nowhere in the legislative record cited by Lilia Cheng does it appear that there was an unequivocal intent to exempt from the bank inquiry order all bank accounts opened prior to the passage of the AMLA. There is a cited exchange between Representatives Ronaldo Zamora and Jaime Lopez where the latter confirmed to the former that "deposits are supposed to be exempted from scrutiny or monitoring if they are already in place as of the time the law is enacted."102 That statement does indicate that transactions already in place when the AMLA was passed are indeed exempt from scrutiny through a bank inquiry order, but it cannot yield any interpretation that records of transactions undertaken after the enactment of the AMLA are similarly exempt. Due to the absence of cited authority from the legislative record that unqualifiedly supports respondent Lilia Chengs thesis, there is no cause for us to sustain her interpretation of the AMLA, fatal as it is to the anima of that law. IX. We are well aware that Lilia Chengs petition presently pending before the Court of Appeals likewise assails the validity of the subject bank inquiry orders and precisely seeks the annulment of said orders. Our current declarations may indeed have the effect of preempting that0 petition. Still, in order for this Court to rule on the petition at bar which insists on the enforceability of the said bank inquiry orders, it is necessary for us to consider and rule on the same question which after all is a pure question of law. WHEREFORE, the PETITION is DISMISSED. No pronouncement as to costs. SO ORDERED.
DANTE O. TINGA Associate Justice

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SECOND DIVISION

G.R. No. 154522

May 5, 2006

REPUBLIC OF THE PHILIPPINES, Represented by the ANTI-MONEY LAUNDERING COUNCIL, Petitioner, vs. CABRINI GREEN & ROSS, INC., MICHAEL J. FINDLAY and JANE GELBERG, Respondents,

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G.R. No. 154694

May 5, 2006

REPUBLIC OF THE PHILIPPINES, Represented by the ANTI-MONEY LAUNDERING COUNCIL, Petitioner, vs. R.A.B. REALTY, INC., MULTINATIONAL TELECOM INVESTORS CORPORATION, ROSARIO A. BALADJAY and SATURNINO M. BALADJAY, Respondents,

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G.R. No. 155554

May 5, 2006

REPUBLIC OF THE PHILIPPINES, Represented by the ANTI-MONEY LAUNDERING COUNCIL, Petitioner, vs. MARIO N. MISA, MICHAEL Z. LAFUENTE, JESUS SILVERIO, REYNALDO NICHOLAS and REX D. JAO, Respondents,

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G.R. No. 155711

May 5, 2006

REPUBLIC OF THE PHILIPPINES, Represented by the ANTI-MONEY LAUNDERING COUNCIL, Petitioner, vs. ALBERTO DE LOS REYES, LORENZO CASTRO, HERMIE DE VERA, EDUARDO LAZO and DANILO LIWAG, Respondents.

RESOLUTION

CORONA, J.:

In the exercise of its power under Section 10 of RA 9160,1 the Anti-Money Laundering Council (AMLC) issued freeze orders against various bank accounts of respondents. The frozen bank accounts were previously found prima facie to be related to the unlawful activities of respondents. Under RA 9160, a freeze order issued by the AMLC is effective for a period not exceeding 15 days unless extended "upon order of the court." Accordingly, before the lapse of the period of effectivity of its freeze orders, the AMLC 2 filed with the Court of Appeals (CA)3 various petitions for extension of effectivity of its freeze orders.1avvphil.net The AMLC invoked the jurisdiction of the CA in the belief that the power given to the CA to issue a temporary restraining order (TRO) or writ of injunction against any freeze order issued by the AMLC carried with it the power to extend the effectivity of a freeze order. In other words, the AMLC interpreted the phrase "upon order of the court" to refer to the CA. However, the CA disagreed with the AMLC and dismissed the petitions. It uniformly ruled that it was not vested by RA 9160 with the power to extend a freeze order issued by the AMLC.4 Hence, these consolidated petitions5 which present a common issue: which court has jurisdiction to extend the effectivity of a freeze order? During the pendency of these petitions, or on March 3, 2003, Congress enacted RA 9194 (An Act Amending Republic Act No. 9160, Otherwise Known as the "Anti-Money Laundering Act of 2001").6 It amended Section 10 of RA 9160 as follows: SEC. 7. Section 10 of [RA 9160] is hereby amended to read as follows: SEC. 10. Freezing of Monetary Instrument or Property. The Court of Appeals, upon application ex parte by the AMLC and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Sec. 3(i) hereof, may issue a freeze order which shall be effective immediately. The freeze order shall be for a period of twenty (20) days unless extended by the court.7 (emphasis supplied) Section 12 of RA 9194 further provides: SEC 12. Transitory Provision. Existing freeze orders issued by the AMLC shall remain in force for a period of thirty (30) days after the effectivity of this Act, unless extended by the Court of Appeals. (emphasis supplied) On April 3, 2003, the Office of the Solicitor General (OSG) filed a "Very Urgent Motion to Remand Cases to the Honorable Court of Appeals (with Prayer for Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction)."8 The OSG prayed for the

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remand of these cases to the CA pursuant to RA 9194. It also asked for the issuance of a TRO on the ground that the freeze orders would be automatically lifted on April 22, 2003 by operation of law and the money or deposits in the concerned bank accounts may be taken out of the reach of law enforcement authorities. The OSG further manifested that pending in the CA were 29 other cases involving the same issue. It requested that these cases be included in the coverage of the TRO prayed for. On April 21, 2003, the Court issued a TRO in these cases and in all other similar cases pending before all courts in the Philippines. Respondents, the concerned banks, and all persons acting in their behalf were directed to give full force and effect to existing freeze orders until further orders from this Court. On May 5, 2003, the OSG informed the Court that on April 22, 2003 the CA issued a resolution in CA-G.R. SP No. 69371 (the subject of G.R. No. 154694) granting the petition for extension of freeze orders.9 Hence, the OSG prayed for the dismissal of G.R. No. 154694 for being moot. It also reiterated its earlier prayer for the remand of G.R. Nos. 154522, 155554 and 155711 to the CA. The amendment by RA 9194 of RA 9160 erased any doubt on the jurisdiction of the CA over the extension of freeze orders. As the law now stands, it is solely the CA which has the authority to issue a freeze order as well as to extend its effectivity. It also has the exclusive jurisdiction to extend existing freeze orders previously issued by the AMLC vis--vis accounts and deposits related to money-laundering activities. WHEREFORE, G.R. No. 154694 is hereby DISMISSED for being moot while G.R. Nos. 154522, 155554 and 155711 are REMANDED to the Court of Appeals for appropriate action. Pending resolution by the Court of Appeals of these cases, the April 21, 2003 temporary restraining order is hereby MAINTAINED. No costs. SO ORDERED.
RENATO C. CORONA Associate Justice

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